London Metal Exchange nickel surged to a fresh record high Wednesday alongside price rises across the entire complex, and traders expect market fundamentals to continue dictating price direction.
Three-month nickel jumped to a fresh record high of $42,350 a metric ton due to short-covering and light speculative buying as stocks remain at critically low levels.
The stock fall Wednesday morning by 162 tons to 3,648 tons, although a small drawdown, was the impetus for steady short-covering, said an LME trader. "Add to that trade support at the lows and prices are at new highs," he added.
Although nickel stocks have steadied in the last month, current levels are down by roughly one half from the start of 2007. With canceled warrants – or material accounted for and to be drawn down at a later date – at 37% of global LME inventories Wednesday, available nickel stocks comprise less than a day of global consumption.
Base metals across the board jumped Wednesday in line with other financial markets. Spot gold pushed through the key psychological resistance of $650 a troy ounce Wednesday due to gains in crude oil prices and the weaker dollar against the euro.
Moreover, the rebound in the base metals complex wasn't a surprise as the market tried to recover from its jitters after a recent sharp fall in equities, Michael Skinner of Standard Bank said.
The downward pressure from outside markets has subsided and allowed fundamentals to reassert themselves, said the LME trader.
U.S. stocks were largely flat Wednesday after European stock markets were modestly higher and the Nikkei fell overnight.
Meanwhile, both copper and aluminium climbed on technical buying, said the trader. A push through copper's 10-day moving average of $6,090/ton triggered a wave of buying to push the metal above $6,100/ton, the trader said, adding that $6,200/ton could be hit in the coming few days.
In other metals, tin extended its recent rise to trade above $13,700/ton as supply concerns continue and stocks fell 30 tons to 10,160 tons Wednesday. Overall LME inventories have fallen roughly 20% since the start of 2007.
At the same time, Indonesian news reports Wednesday said the government will impose a quota on tin exports to help maintain a global market price for the metal above $12,000/ton. However, the report failed to provide further details on what the quota's volume might be or when it might be imposed.
Last October, Indonesia, which supplies about one third of the world's tin, closed dozens of small-scale smelters that together produce about half the country's annual tin output on allegations they were purchasing tin ore illegally, damaging the environment and evading taxes.
Prices in dollar a metric ton.
3 Months Metal Bid-Ask Change from
Tuesday PM kerb
Copper 6140.0-6150.0 Up 165
Lead 1850.0-1855.0 Up 30
Zinc 3355.0-3360.0 Up 46
Aluminium 2729.0-2730.0 Up 35
Nickel 42000.0-42005.0 Up 1600
Tin 13600.0-13605.0 Up 325
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