By Mai Nguyen
SINGAPORE, July 22 (Reuters) - Nickel prices dropped on Monday as a rally that sent the metal used mostly in making stainless steel to its highest in more than a year started to lose steam.
Three-month nickel on the London Metal Exchange (LME) fell 2.5% to $14,360 a tonne by 0701 GMT, while the Shanghai Futures Exchange's (ShFE) most-traded nickel contract ended down 3.8% to 113,170 yuan ($16,457.50) a tonne.
LME nickel prices touched $15,115 a tonne on Thursday, their highest since June 2018, after rising 20% in the previous two weeks.
"Nickel price should come down as the current price is already far from its fundamentals. Short-term price was driven by money, so price should drop when the money flows out," said a China-based nickel analyst.
But prices should not fall too much as short position holders, or those traders expecting that prices will fall, fear that another price rally will be driven by major industry players, the analyst said.
Chinese firm Tsingshan Holding Group has been buying large quantities of nickel nickel on the LME to supplement its own output, two sources familiar with the matter told Reuters last week.
* NICKEL INVENTORIES: LME nickel inventories MNISTX-TOTAL were hovering around a 6-1/2-year low, while latest data showed that the global nickel market deficit widened to 12,500 tonnes in May from 7,500 tonnes in the previous month.
* CHINA NICKEL: China's imported refined nickel prices surged to 117,700 yuan a tonne on Thursday, the latest data showed, reflecting a price surge in the futures markets while there is no sign of shortage in the spot market in China, analysts said, citing ample stocks in ShFE and Shanghai bonded warehouses. SMM-NIC-IMP
* CHINA: China will further ease its economic policy to deal with a prolonged and costly trade war with the United States, but it would save more aggressive measures as last resorts should the dispute get uglier, policy sources say.
* ANGLO AMERICAN: Anglo American said on Friday it had submitted an environmental impact study for a $3 billion project seeking to maintain output from its flagship Los Bronces copper mine in Chile.
* RARE EARTHS: Australian rare earths developer Northern Minerals said on Monday it had raised A$30 million ($21 million) from shareholders to fund expansion at its Browns Range project after trade tensions refocused interest in the industry.
* PRICES: Benchmark London copper fell 0.4%, aluminium edged down 0.2% and lead declined 1.5%. In Shanghai, copper futures dipped 0.2%, while aluminium retreated 0.5% and zinc decreased 1.5%.
* COLUMN: Rio Tinto's Mongolia copper problems highlight frontier country risks, said Reuters columnist Clyde Russell.
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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 = 6.8765 Chinese yuan renminbi) ($1 = 1.4221 Australian dollars) (Reporting by Mai Nguyen; Editing by Subhranshu Sahu and Christian Schmollinger)