Nickel Extends Longest Rally in 42 Months After Goldman Forecast

Apr 14, 2014 1:47 pm ET

April 14 (Bloomberg) -- Nickel prices rose, extending the longest rally in 42 months, as Goldman Sachs Group Inc. said the price is poised climb an additional 12 percent because of limited supplies.

On the London Metal Exchange, nickel for delivery in three months jumped 2.2 percent to settle at $17,790 a metric ton at 5:53 p.m. Earlier, the price reached $17,917, the highest since Feb. 19, 2013. The commodity climbed for the 11th straight session, the longest advance since Oct. 6, 2010.

The price may climb as high as $20,000 a ton, Goldman said in a report dated yesterday. Nickel gained 28 percent this year after Indonesia, the world’s top producer from mines, barred exports of raw mineral ores in January. Russia, home to OAO GMK Norilsk Nickel, the leading producer of refined metal, might face more sanctions from the U.S. and Europe amid turmoil in Ukraine.

“We have been bullish on nickel since the start of the year, but prices have risen more quickly than in our base case,” Jeff Currie, an analyst at Goldman Sachs, said in the report. “The price rally predominantly reflects the ongoing Indonesian ore export ban” and “concerns about the potential impact of any sanctions on Russian commodity exports.”

Citigroup Inc. raised its 2015 estimate by 13 percent to $21,500 a ton.

Shortfall Looms

While the market expects inventories in China, the largest consumer, to last from eight to 12 months after the export ban, most of those supplies are concentrated in the hands of the larger nickel pig-iron producers, and smaller ones may begin to run out of higher-grade Indonesian-sourced ore as soon as the end of this month, Citigroup said.

Nickel open interest rose to a record 297,642 contracts as of April 10. In March, the contracts outstanding jumped 18 percent, the most since September 2007.

The market “remains in an artificially induced squeeze, one that could propel prices even higher from current levels,” Edward Meir, an analyst at INTL FCStone Inc. in New York, said today in a report. The tension between Russia and Ukraine “continues to merit increased attention, as it has the potential to destabilize the markets, should it spiral out of control,” he said.

Zinc, lead and tin gained in London, while aluminum and copper dropped.

On the Comex in New York, copper futures for May delivery rose 0.2 percent to $3.0475 a pound. Stockpiles monitored by the LME dropped for the 13th straight session to the lowest since November 2012.