Nickel Caps Biggest Five-Day Gain Since 2011 on Indonesia Ban

Jan 16, 2014 1:59 pm ET

Jan. 16 (Bloomberg) -- Nickel prices rose, capping the biggest five-session gain since 2011, amid mounting concern that supplies will tighten after a ban on ore exports from Indonesia, the world’s top producer of the metal from mines.

Macquarie Group Ltd. and Barclays Plc expect the market to swing to a deficit next year on the ban effective Jan. 12. Orders to withdraw nickel from stockpiles tracked by the London Metal Exchange jumped 4.2 percent, the most in seven weeks.

Before the shortfall, the global production surplus will drop to 35,000 metric tons this year from 150,000 tons in 2013 as supplies of nickel pig iron decline because of the Indonesian ban, Macquarie said this week in a report. This month, the price has climbed 5.7 percent, leading the six main metals traded on the LME.

“With Indonesia actually putting in place the ban on those exports, it’s quite understandable that nickel will be up,” Patricia Mohr, an economist at Scotiabank Group in Toronto, said in a telephone interview. She said that prices may rally to $15,430 a ton, which would mark the highest since June.

On the LME, nickel for delivery in three months rose 1.1 percent to settle at $14,695 a ton at 5:50 p.m. In five sessions, the price climbed 9.6 percent, the most since Oct. 27, 2011. Earlier, the metal reached $14,725, the highest since Oct. 30.

The rally may be short-lived, and prices may fall to $14,000 because of “gross oversupply,” Credit Suisse analysts including Andrew Shaw said today in a report.

‘Froth’

“We do not recommend investors chase the current rally higher, but rather expect the froth to fade,” Credit Suisse said. “The latest surge in nickel prices is not a convincing sign of a permanent breakout from the doldrums.”

Indoferro PT said it plans to double capacity at a 200,000 ton plant in Indonesia next year. The company produces nickel pig iron with 8 percent purity, compared with 4 percent required by the government for exemption from the export ban.

“Nickel and aluminum still draw support from Indonesia concerns,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in an e-mail. “For the likes of copper, activity is slowing ahead of the Lunar New Year holiday in China at the end of the month. Some small-scale profit-taking is possible.”

Copper for delivery in three months fell 0.6 percent to $7,310 a ton ($3.32 a pound) in London. On the Comex in New York, futures for March delivery dropped 0.5 percent to $3.3425 a pound.

Aluminum and tin rose in London, while lead and zinc dropped.

--With assistance from Eko Listiyorini in Jakarta. Editors: Joe Richter, Patrick McKiernan