Currency woes hit metal marts

Currency woes hit metal marts

PERTH (Reuters): Demand for metals in Southeast Asia has fallen off dramatically due to the region's currency crisis, industry executives and traders said yesterday.

Orders for zinc and nickel, widely used in steelmaking, are showing signs of softening as countries such as Taiwan, Indonesia and Malaysia re-think their ability to finance big infrastructure projects.

Uncertainty over future demand for zinc in the region, which is closely tied with automotive and structural steel galvanizing activities is placing further downward pressure on a market already reeling from recent price collapses, traders said.

Much of the metal produced in Australia traditionally is exported to Japan and South Korea, although Southeast Asian markets have taken increasingly bigger shares in recent years as their economies boomed.

"The currency crisis has really thrown a lot of companies that grew to depend on Southeast Asia into a loop," said one trader.

Pasminco Ltd., the world'a biggest zinc company, has seen its share price slip as concerns mount that forecasts for zinc consumption may be overblown.

Australia's largest nickel miner, WMC Ltd., this week sacked nearly 10 percent of its workers in its Western Australia division due to poor market conditions.

Traders said they expected a backlog of metals to build at the producer, consumer and trading levels as Southeast Asian demand continues to wane.

Some copper is being diverted to other parts of the world, including Europe, which is pushing down terminal and physical market prices.

Requirements for aluminum and copper sold in spot markets have been particularly hard hit, as depreciated currencies coupled with reduced industrial activity begin to discourage buyers from rebuilding stocks, they said.

Greg Turnidge, managing director of Aluminum Smelters of Victoria Pty. Ltd. (Aluvic), said that long-term contract sales of aluminum to key markets were intact but that spot sales were down.

Spot aluminum premiums have fallen in step with demand by as much as US$10 or $20 a ton to around $65 a ton in Japan, Turndige said.