Two of the world's most important industrial metals, copper and nickel, fell to six- and 12½ -year lows on Friday, battered by a negative mix of weaker Chinese growth, a stronger U.S. dollar and too much metal.

The day's declines made nickel the first commodity to fall below the levels it traded at before the financial crisis, while copper has lost 11% of its value this month-to-date alone.

Many investors see little respite for these and other base metals, as Chinese demand continues to wane and an expected U.S. interest-rate rise bolsters the dollar.

The price falls will heap further pressure on some of the world's largest miners, from Glencore PLC to Russia's Norilsk Nickel, and put further strains on the budgets of many emerging-market nations.

"Ultimately commodities are going to continue heading lower (because) there's anticipation of China slowing down, Europe slowing down and the dollar getting stronger," said Daniel Pavilonis, a senior market strategist with RJO Futures in Chicago.

The most actively traded copper futures contract, for December delivery, was recently down 0.95 cent, or 0.5%, at $2.0670 a pound on the Comex division of the New York Mercantile Exchange.

The London Metal Exchange's three-month nickel contract was down 3.1% at $8,670 a metric ton in afternoon European trade, having fallen seven days in a row to hit a 12½ -year low at $8,650 a ton earlier in the session.

Nickel has fallen due to lower-than-expected stainless-steel consumption globally and destocking of inventories in China, the world's largest consumer of most commodities. About 72% of last year's nickel was used to make stainless steel where demand growth is forecast to fall 2% as of November from the 4% expected in April, according to data cited by Europe's largest stainless steelmaker Outokumpu.

Even as demand falls, the world remains awash with excess nickel supply. This year, analysts expect a surplus of 0.8% in this metal, which goes into everything from skyscrapers to dishwashers.

"Stainless demand still looks quite sluggish and [there] doesn't seem to be a willingness from the nickel producers to really cut production," said Nicolas Robin, a commodities fund manager at Columbia Threadneedle Investments, which has £ 311 billion ($473 billion) in assets under management and has moved to an underweight metals position.

Copper is now trading at its lowest level since May 2009, hurt, most recently, as the dollar gains ground against the euro.

Copper is widely used in construction and manufacturing, making its price sensitive to shifts in the global economic outlook. Prices have tumbled 27% this year on signs of slower economic growth in China, the world's top copper buyer. Traders worry that China's demand for copper will slow at a time when mine supply continues to expand, leading to a prolonged glut of the metal.

Macquarie Research recently estimated that the copper market will see a 0.6% surplus this year. But the mines keep coming. Next year, four new mines will increase the world's copper production by 5.1%, according to Barclays.

All metals are also being pummeled by the rising dollar, which is up 1.9% on the WSJ Dollar Index since Oct. 30. The dollar is gaining as investors anticipate the first U.S. interest-rate rise in almost a decade. A higher dollar makes dollar-price commodities more expensive for most countries, including China.

Analysts estimate that half of all nickel production is now unprofitable. For copper, around 15% to 20% of global production capacity is loss-making at current copper prices, according to Macquarie Research.

Brazilian mining firm Vale SA in April suspended the possible initial public offering of its base-metals division after an expected rebound in nickel prices failed to materialize. Vale's share price is down 37% this year-to-date.

The falling price of copper has hammered the share prices of Glencore PLC and Freeport McMoRan, down 37% and 65%, respectively, this year. Both miners, and others, have tapped the stock market to raise cash and have sold assets to shore up their balance sheets.

"We're generally negative on metals as a sector," said Columbia Threadneedle's Mr. Robin. "It's really difficult to see [any] support for metals."

Write to Ese Erheriene at ese.erheriene@wsj.com, Tatyana Shumsky at tatyana.shumsky@wsj.com and Alex MacDonald at alex.macdonald@wsj.com

 

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(END) Dow Jones Newswires

November 20, 2015 14:45 ET (19:45 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.
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