Stir at CVRD plant fuels nickel prices

Nickel rose the most in more than a week in London on speculation a strike among support staff at Cia Vale do Rio Doce's (CVRD) Canadian operations will exacerbate a shortage of the metal.

About 330 workers, including clerical staff, surveyors and laboratory employees at Vale's Sudbury unit in Ontario began a stoppage yesterday. Production may be cut by about 25 per cent, according to a union official. Nickel inventories monitored by the London Metal Exchange fell 3.4 per cent to 5,232 tonne, the exchange said. Stockpiles have slumped 84 per cent this year to less than two days of global consumption.

"This market is so finely balanced at the moment that even a strike by office workers can fuel the market,'' said Alex Heath, who heads the base-metals trading team at RBC Capital Markets in London. "There are no sellers at the moment.'' Nickel for delivery in three months on the London Metal Exchange rose for a sixth-consecutive day, gaining $1,100, or 2.5 per cent, to $45,950 a tonne.

Earlier, it gained as much as 2.8 per cent, the biggest one-day increase since March 22. The metal gained 8.2 percent last week, rallying from an 8.8 per cent drop the previous week.

Nickel has almost tripled in the past year on rising demand for stainless steel in China, the world's largest nickel consumer. Usage in China may grow 28.5 per cent this year to 320,000 tonne, Macquarie Bank said in a report.

Among other LME-traded metals, copper slipped $13 to $6,847 a tonne , aluminum fell $20 to $2,760, zinc dropped $35.50 to $3,219.50 and lead fell $13 to $1,907. Tin advanced $100 to $13,500 a tonne.

The strike at Sudbury, 370 km (230 miles) northwest of Toronto, may crimp nickel output because surveyors guide miners drilling through ore and lab workers must monitor mineral composition. Their absence, along with picketing on routes used to transport ore, "would impact production", union spokesman Dan O'Reilly said on March 28.

"The strike won't shut the operation, but we expect it could reduce production by about 25 per cent,'' said Dan Serre, a local executive with the United Steel Workers. The contract expired at midnight.

Vale's complex in Sudbury includes six mining operations and a smelter, mill and nickel refinery, spokesman McPhee said.

"We're disappointed,'' he said in an interview.

"The main issue seems to be money.'' The strikers allowed unionised workers belonging to other United Steel Workers' locals to cross picket lines, he said.

Production and maintenance supervisors were blocked.

Normal production: "We'll maintain dialogue with the union to get access,though there will be no other negotiations,'' McPhee said.

"We're at normal production right now.'' Vale is unsure how this strike may affect operations because it's the first time this union local has walked out, he said.

Vale acquired the Sudbury operations when it bought Inco Ltd last year. Xstrata Plc, the world's fourth-largest copper and nickel producer, also has nickel operations in the Sudbury basin.

Xstrata said February 28 it reached a "tentative'' agreement with a union representing about 200 office, clerical and technical employees at Sudbury.