Nickel near 15 - month high on supply concerns

Bareksa.com - Nickel prices climbed towards 15-month highs on Wednesday, on worries about tightening supplies from Indonesia following an export ban on unprocessed ores and concerns that political tension could restrict supply from Russia.

Three-month nickel on the London Metal Exchange climbed to a session high of $18,700 a tonne, within a whisker of a 15-month high of $18,715 hit on April 28.

At 0957 GMT, it traded at $18,570, up 0.4 percent from Tuesday's close. Nickel prices have surged more than 30 percent this year

Prices for nickel ore in China have surged this year after Indonesia banned shipments of the raw material which is used to make nickel pig iron (NPI) - a substitute for refined nickel in its stainless steel industry.

Coinciding with the ore export ban were worries that hefty sanctions could be imposed on Russia, home to the world's largest nickel miner Norilsk Nickel, following its intervention in Ukraine. So far Norilsk is not among the 17 companies that the United States sanctioned.

Ukraine has experienced its deadliest week since a separatist uprising began, with the country's slide towards war depressing appetite for risk.

"The geopolitical tensions are one of the major drivers for nickel and we do not see this situation finding any solution soon enough so things can very well become ugly before they become any better," said Naeem Aslam, chief market analyst at Ava Trade.

In a further boost to nickel prices, some stainless steel makers have turned back to refined nickel and scrap metal as feed for their production, said Peter Peng of consultancy CRU in Beijing.

"NPI production started to drop in April as some of the largest producers also cut back production because their laterite ore stocks decreased greatly," he said.

Nickel pig iron is typically formed from laterite ore with low nickel content, from Indonesia and the Philippines.

"Some plants had stocked (a total of) about 2 or 3 million tonnes early this year, but less than 1 million tonnes (is) left in their warehouses," he said.

Prices for 1.8 percent laterite ore have soared to $100 per tonne on a cost insurance and freight (CIF) basis from $65 a tonne in mid March, CRU estimates.

Reflecting the changes in Indonesia's trade regulations, analysts at BofA-ML upgraded their average 2015 nickel price forecasts by 33 percent to $23,836 a tonne.

"We believe nickel can trade to $25,000/tonne in the coming twelve months," the analysts said.

Benchmark copper slipped 0.7 percent to $6,666.75 a tonne, with the outlook for demand from top consumer China remaining uncertain.

Expansion in China's services industry slowed slightly in April, with employment growth slipping to a seven-month low, a private survey showed.

CME Group Inc's new U.S. aluminium futures contract debuted on Tuesday with just 57 lots of metal changing hands as the Chicago-based exchange launched its audacious bid to challenge the London Metal Exchange's $51 billion market.

"The futures contract was introduced in the U.S. in response to the long waiting times for shipment of aluminium from the LME's warehouses. If the contract sees liquid trading, it could compete with LME trading of aluminium," Commerzbank analysts said in a note. (Source : Reuters)