Nickel Rises to Highest in 27 Months on China Outlook, Supply

May 12, 2014 1:51 pm ET

May 12 (Bloomberg) -- Nickel rose to the highest in 27 months, leading gains in metals, amid tightening supply and signs that the government will take steps to strengthen financial markets in China, the world’s biggest consumer.

China will develop commodities-trading tools, relax limits on some foreign investment and expand quotas for capital flow, the State Council said in a statement posted on the central government’s website May 9. Vale SA, the second-largest nickel producer, halted operations at its New Caledonia plant last week after an acid spill, compounding supply concerns as a ban on unprocessed ores by Indonesia entered its fifth month.

“The market has responded to the upside in all the metals because of the potential for Chinese stimulus,” Michael Turek, a senior director at Newedge USA LLC, said in a telephone interview. “Certainly it’s Vale and all the supply constraints” that are helping push prices higher, he said.

Nickel for delivery in three months climbed 5.1 percent to settle at $20,925 a metric ton at 5:50 p.m. on the London Metal Exchange after touching $21,468, the highest since Feb. 10, 2012. Prices have climbed 15 percent since May 2, the biggest five-session rally since February 2010.

Russia, under threat of sanctions after intervening in Ukraine, is home to OAO GMK Norilsk Nickel, the leading producer of the refined metal. Two Ukrainian regions held referendums on autonomy yesterday as European leaders threatened more sanctions against Russia. Vale said production at its New Caledonia plant will resume “shortly.”

Nickel’s 14-day relative strength index was near 90 today. Since April 9, it has exceeded 70, a level suggesting an impending drop to some analysts who study technical charts.

Copper for delivery in three months gained 2 percent to $6,879 a ton ($3.12 a pound) on the LME. Zinc, lead and aluminum also rose, while tin declined in London.

On the Comex in New York, copper futures for delivery in July climbed 2.2 percent to $3.1495 a pound.

--With assistance from Jae Hur in Tokyo and Agnieszka Troszkiewicz in London.