Nickel falls as Xstrata staff accept offer

Nickel dropped in London after Xstrata Plc said it reached a ``tentative'' agreement on a new labour contract with workers at a Canadian unit, avoiding a strike that would have affected 4 percent of global supply.

The union represents 1,027 workers at the Sudbury, Ontario, unit and threatened to strike unless agreement was reached by yesterday's deadline. Nickel rose to a record last week on speculation a strike would exacerbate a global supply shortfall.

"The market has been surprised by the last-minute settlement,'' said Kevin Tuohy, a trader at Man Financial Ltd, one of 11 companies trading on the London Metal Exchange's floor. "You may see prices down by another $2,000, $3,000,'' he said in an interview.

Nickel for delivery in three months on the LME fell $400, or 1 percent, to $36,600 a metric ton as of 12:28 p.m. local time. It earlier slid as much as 3 percent to $35,900. The metal used in stainless steel traded at a record $38,950 on January 26.

The metal has risen more than sixfold in the past five years on demand from China, which overtook Japan last year asthe world's largest stainless-steel producer. Global demand will beat supply by 1,000 tons in 2007, from a deficit of 6,000 tons last year, Daniel Brebner, an analyst at UBS AG, said yesterday in a report.

Nickel's decline wasn't "massive" in the context of the metal's historical price movement, Tuohy said.

"That indicates the market is very tight.''

Inventories dropped 606 metric tons, or 15 percent, to 3,366 tons, the LME said today in a daily report. That's the largest one-day decline since Aug. 9, 2004. Stockpiles have plunged 91 percent in the past 12 months to their lowest since July 1991.

Details of the three-year agreement at Sudbury, reached minutes before a strike was set to begin at midnight local time, won't be released until the unionised workers get a chance to see it, Hemi Mitic, assistant to the president of the Canadian Auto Workers union, said today in an interview.

Sudbury's unionised workers went on strike for three weeks in 1997, seven months in 2000 and 2001 and three weeks in 2004. Xstrata acquired the unit after it bought Canadian nickel producer Falconbridge Ltd. for $18 billion in July.

Copper dropped for the first session in four, after a 2 per cent jump in stockpiles.

"We have seen the best of this extraordinary commodity price boom,'' Nick Moore, an analyst at ABN Amro Holding NV in London, said in a report. ``The rising tide of global production- notably for aluminum and copper, but to embrace zinc too - will see further inventory increases.''

Inventories of copper monitored by the LME gained 4,275 tons to 216,100 tons, the exchange said today. Stockpiles have risen 18 percent this year to their highest since March 2004.

Also on the LME, copper dropped $60 to $5,675 a ton, aluminum fell $13 to $2,717 and tin dropped $350 to $11,650. Lead gained $6 to $1,685 and zinc declined $66 to $3,414.