Nickel prices rebound, boosted by speculation of Glencore output cuts

By James Regan and Melanie Burton
SYDNEY/MELBOURNE, Oct 13 (Reuters) - Nickel prices have
rebounded after dropping to a near seven-year low last week,
buoyed by market speculation that heavily indebted miner and
trader Glencore Plc GLEN.L could curb output following cuts
to its copper and zinc production.
Glencore is the world's fifth-biggest producer of nickel,
with operations in Australia, Canada, Norway, New Caledonia, and
Dominican Republic, much of which was acquired in its 2013
takeover of Xstrata.
Glencore, whose shares have been hammered by worries about
its debt burden, declined to comment on the speculation.
"In nickel, as in copper and zinc, an output cut by Glencore
could have an immense impact," said Minelife commodities analyst
Gavin Wendt.
"It would not only send the right message to Glencore's
investors and bankers, it would be saving the company money and
probably lift the nickel price in the process."
London Metal Exchange nickel CMNI3 stood at $10,460 a
tonne on Tuesday, 15 percent above the $9,100 it fetched on Aug.
12, its lowest price since December 2008.
That is despite a mammoth 440,000 tonnes of nickel stocks in
LME warehouses in a 2-million-tonnes-a-year market.
UBS analyst Daniel Morgan estimates that 50 percent of the
world's nickel is being produced at a loss at close to today's
price - among the most extreme across mined commodities.
"Despite this, shuts have been few and relatively the worst
response versus other commodities," Morgan said in a report,
adding any lowering of supply by producers would be very
supportive for prices.
The biggest cuts to date have come from Canada's Sherritt
International Corp S.TO . In July it reduced its 2015 nickel
production target to 78,000-82,000 tonnes from a previous
estimate of 80,000-86,000 tonnes. urn:newsml:reuters.com:*:nL3N1085BT
Nickel, even more so than copper and zinc, has
underperformed for Glencore.
The nickel division saw a 25-percent drop in revenue in the
first half compared with 12 percent and 8 percent declines for
copper and zinc respectively.
Copper prices rebounded from six-year lows in September after
Glencore said it would suspend copper operations in the
Democratic Republic of Congo and Zambia for 18 months, removing
400,000 tonnes from the supply pool.
Last Friday, zinc CMZN3 galloped 10-percent higher - its
single biggest one-day gain in at least a decade - after
Glencore said it was eliminating 500,000 tonnes of zinc
production, or 4 percent of global supply.
"The move in copper and zinc suggest Glencore may be looking
at doing the same in nickel," said Australia and New Zealand
commodities analyst Daniel Hynes.
As it wrestles with ways to cut $30 billion in debt by a
third, Glencore has shown it can be ruthless in jettisoning
unwanted nickel assets.
In June it sold the mothballed Cosmos nickel mine for A$24.5
million, a fraction of the A$3.1 billion Xstrata had spent in
2008 to acquire its then owner Jubilee Mines.