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Paul Simao
Toronto, Feb 24: Shares of Canadian nickel producers jumped on Wednesday as investors celebrated a rally in metals markets that pushed the price of nickel to nine-month highs.
Shares in Inco Ltd and rival Sherritt International Corp, two Toronto-based companies hard hit by last year's slump in metals markets, posted solid gains on the Toronto Stock Exchange.
Sherritt, which operates a joint venture nickel mine at Moa in north western Cuba, gained C$0.30 to close at C$2.95 a share, or 11.3 per cent, in steady trading on the TSE.
Inco, the western world's largest nickel producer, jumped C$0.70 to close at C$17.50 a share, or 4.1 per cent, on Canada's largest exchange. The company also benefited from news that New York-based brokerage Goldman Sachs had raised its rating on the Canadian nickel producer to market perform from underperform.
But analysts pointed to the higher price of nickel, which rose to $2.20 a pound on the London Metal Exchange (LME) from $1.95 a pound three weeks ago, as the main trigger for renewed confidence in nickel shares.
The nickel price was boosted by falling LME nickel stocks, which now stand at a three-month low of 61,284 tonnes.
"What we have seen happening over the past week is that there has been a fairly significant draw down in LME inventories of nickel," said Andrew Montano, director of precious and base metals trading at Scotia Mocotta in Toronto.
Markets were also rife with rumors that a major Canadian producer would announce a fresh round of production cuts. Inco, reeling from one of its worst annual performances in recent memory, announced two weeks ago that it would cut 1999 nickel production to 408 million pounds from 423 million pounds last year. The giant nickel producer lost $76 million, or $0.63 a share, in 1998, compared with a profit of $75 million, or $0.25 a share, in the previous year.
The company's production cut came on the heels of a similar move by Canadian rival Falconbridge Ltd. late last year. Toronto-based Falconbridge voluntarily shut down its Falcondo operations in the Dominican Republic for three months in October, which, when combined with a weather-related shut down in September, cut 22 million pounds from nickel production.
"They are not increasing planned output, so on balance it's neutral," said a LME trader. Despite the production cuts and improved inventory picture, analysts said a sustained rally in both nickel prices would hinge upon signs of a solid economic recovery in key Asian markets.
Asia accounted for 35 per cent of world nickel consumption just three years ago, but the region's appetite for metal fell precipitously in late 1997 and 1998 with the onset of the Asian flu.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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