LME nickel rallies on fund buying

Price rises across the London Metal Exchange base metals complex Thursday helped boost nickel over 7% to just shy of its record high, with speculative fund activity continuing to add major volatility to all the base metals.

Three-month nickel jumped over 7% to a session high of $34,900/ton, just shy of the metal's all-time high of $34,950/ton from Dec. 15, before retreating to a PM kerb of $33,450/ton.

"Speculative fund buying based on technicals has really pushed prices sharply higher," said a trader. The metal is benefiting from bullish sentiment across the base metals complex, the trader added.

In addition, low LME stocks and ongoing supply concerns underpin the price rally.

LME nickel stocks fell 156 metric tons to 6,300 tons Thursday, down around 80% on the year, according to LME data. In addition, LME data showed canceled warrants at 30% Thursday.

French nickel producer Eramet SA said Wednesday it has so far lost around 5,000 tons of metal output at its production site in New Caledonia due to a strike and other disruption.

Continuing strong nickel demand from stainless steel producers is helping to keep prices high, said John Meyer at Numis.

Analysts expect price volatility to continue during the ongoing Dow Jones-AIG commodity index fund rebalancing. The index rebalancing will be completed Jan. 16.

Three-month zinc, recently hit alongside nickel by the index rebalancing, pushed sharply higher on speculative activity as zinc stocks dropped by 425 tons to 93,825 tons Thursday.

Copper remained within Wednesday's range in choppy trading despite a substantial increase in LME stocks by 1,625 tons to 195,450 tons.

However, a trader said: "There are a large number of shorts in the market that may cover in the near term," adding: "If copper pushes past the $6,100/ton level, it could easily spike towards the 30-day moving average of $6,533/ton."

Meanwhile, aluminium staged a strong rally, jumping nearly 1.5% from Thursday. Many traders have said prices may rise sharply higher in the near future on a possible short squeeze as one dominant player continues to hold a significant long position of more than 40%.

Prices in dollar a metric ton.
3 Months Metal     Bid-Ask        Change from
                                 Wednesday PM kerb
Copper          5899.0-5900.0        Up   20
Lead            1629.0-1630.0        Up   30
Zinc            3873.0-3874.0        Up  133
Aluminium       2735.0-2737.0        Up   25
Nickel         33450.0-33500.0       Up  950
Tin            10680.0-10690.0       Up  280