October 29, 2019 / 7:25 AM / 25 days ago

METALS-Nickel pares early gains; investors see metal as overpriced

(Updates prices)

By Mai Nguyen

SINGAPORE, Oct 29 (Reuters) - Nickel prices fell on Tuesday, as they erased early gains on the back of supply shortage fear from top producer Indonesia, after investors saw nickel as overpriced.

Some Indonesian miners said on Monday they would stop nickel ore exports immediately, two months earlier than a nation-wide exports ban, which propped the metal's prices in early trade on Tuesday.

Benchmark nickel on the London Metal Exchange (LME) rose as much as 2.2% to $17,000 a tonne, while the most active nickel contract on the Shanghai Futures Exchange (ShFE) climbed as much as 2.8% to a two-week high at 136,630 yuan ($19,363.94) a tonne.

However, both contracts fell later in the session, with LME nickel edged up 0.03% by 0702 GMT while ShFE nickel dipped 0.2%.

LME nickel prices had risen as much as 76% as of September from the beginning of 2019 on supply shortage fear, but prices have been retreating since, as market participants think nickel is over-priced.

"Fundamentals are not looking great. China and U.S. manufacturing purchasing managers indices are definitely pointing in that direction," said a base metal trader, adding that $17,000 was a resistance for nickel prices last week.

FUNDAMENTALS

* TECHNICALS: LME nickel is facing an immediate resistance level of $17,200 a tonne, a break above which could lead to a gain limited to $17,993, said Reuters commodities technicals analyst Wang Tao.

"Nickel failed to break resistance at $17,993 in September. It is expected to retrace further to $14,533," he said.

* NICKEL STOCKS: Refined LME nickel inventories MNISTX-TOTAL fell to their lowest since December 2008 at 70,650 tonnes, while ShFE nickel stocks SNI-TOTAL-W were at 24,646 tonnes, or around 80% lower than its 2016-peak.

* NICKEL SPREAD: The premium of LME nickel cash over the three-month contract MNI0-3 returned to premium this week and was last at $26 a tonne, indicating tight nearby supplies.

* ZINC PRICES: ShFE zinc hit a nearly six-week high at 19,225 yuan a tonne earlier in the session before closing up 0.8% to 19,110 yuan, tracking previous gains in London after on-warrant LME zinc stocks MZNSTX-TOTAL dropped to a record low of 33,000 tonnes.

* ZINC: The premium of LME cash over three-month zinc contract CMZN0-3 rose to $46.50 a tonne, its highest since September 30, while refined zinc is expected to be in a deficit of 178,000 tonnes in 2019 before moving to a surplus next year.

* TRADE TALKS: U.S. President Donald Trump said on Monday he expected to sign a significant part of the trade deal with China ahead of schedule.

* COPPER TC/RC: The copper treatment charge (TC) benchmark in 2020 is likely to fall at least 13% from this year to $60-70 a tonne due to tight ore supply, a Reuters survey showed.

* COPPER SUPPLIES: Unionized workers at BHP's Escondida copper mine, the world's largest, said they would walk off the job for part of Tuesday, while Ecuador plans to ship its first large copper cargo within weeks.

* METALS OUTLOOK: Prices of copper and other industrial metals are expected to be capped next year as weak economic growth weighs on the market, a Reuters poll showed.

* PRICES: LME copper eased 0.2% to $5,895 a tonne, aluminium was unchanged at $1,737 a tonne. ShFE copper declined 0.3% to 47,340 yuan a tonne and aluminium decreased 0.3% to 13,785 yuan a tonne.

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PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Most active ShFE nickel

Three month LME tin

Most active ShFE tin

ARBS ($1 = 7.0559 Chinese yuan renminbi)

Reporting by Mai Nguyen; Editing by Rashmi Aich

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