Nickel Climbs as Citigroup and Macquarie See Supply Shortfall

Jun 17, 2014 6:27 pm ET

June 17 (Bloomberg) -- Nickel rose after Macquarie Group Ltd. and Citigroup Inc. reaffirmed their outlooks for supply shortfalls and advised buying the metal following three straight weekly price drops, the longest slump since November.

Nickel surged to a two-year high in May after Indonesia, the largest global producer from mines, barred raw-ore exports in January. Prices have since fallen 12 percent, and that “represents a buying opportunity” even as speculative demand may be cooling temporarily, Macquarie analysts including Colin Hamilton in London said in a report today.

“The fundamental drivers behind our bullish nickel call are unchanged,” Hamilton said. “Nothing has changed with regards to the fundamental supply shortage that is resulting from Indonesia’s decision to ban exports of nickel ore.”

Nickel for delivery in three months rose 2.5 percent to settle at $19,120 a metric ton by 5:51 p.m. on the London Metal Exchange after touching $19,215, the highest since June 4. The run of weekly drops through June 13 was the longest since Nov. 29.

Prices climbed above the 50-day moving average of $18,598.

Citigroup said supply will trail demand next year through at least 2018.

“We continue to believe the nickel ore export ban will remain in place and the nickel market will turn to deficit by the end of 2014,” Citigroup analysts including Matthew Schembri said in a report today.

Chinese production of nickel pig iron, a cheaper alternative to refined metal, started to drop on a monthly basis in April and fell “sharply” in May as the nation’s imports of Indonesian ore slid and the nickel content of stocks declined, according to Macquarie. Further declines in output are expected, the bank said.

Copper for delivery in three months gained 0.2 percent to $6,705 a ton ($3.04 a pound) on the LME. Tin, zinc and lead gained in London. Aluminum fell.

On the Comex in New York, copper futures for delivery in September rose 0.5 percent to close at $3.058 a pound.

--With assistance from Luzi Ann Javier in New York.