LME nickel rises on supply concerns

London Metal Exchange nickel ended just off a fresh all-time high as the market took in talk that a cargo equivalent to one-fifth of the world's warehoused inventories of the metal could be at risk due to bad weather, brokers said.

A container ship damaged and drifting off the coast of the U.K. has at least 1,000 metric tons of nickel, sources familiar with the situation said, providing a short-term boost to an already tight market.

LME stocks stand at 5,322 tons. But because 744 tons are on canceled warrant – meaning they're accounted for and about to be drawn down – there's just 4,578 tons available to the market from warehouses. This is about one and a half days' global consumption.

MSC Napoli hasn't sunk, its owner U.K.-based Zodiac Maritime Agencies Ltd said, and is cracked rather than holed. Therefore the ship is likely to be recovered intact, meaning the impact of the news will likely be short-lived.

But speculative and trade buyers entered nickel, pushing prices to $36,050 a ton. "The market needs little excuse to push nickel higher," a broker said. This is a gain of 3% on the day and 7% up from Wednesday's low. So far this year, nickel prices have moved 20% higher.

Ending the kerb session at $35,700/ton, brokers said further gains are expected as fundamentals stay firm, with the market moving in uncharted territory.

Aluminium was quiet as the tightness in the nearby spreads continued, although the tomorrow-next backwardation eased to around $5-$6/ton. The market remains underpinned by a shortage of metal for immediate delivery, which has kept the nearby backwardation going, analysts said.

"LME stocks of aluminium at over 700,000 tons, the equivalent of eight days consumption, are higher than for the other base metals but the problem is that they appear to be tightly controlled," said UBS analyst Robin Bhar.

The other markets were subdued with little outright activity seen.

Copper was consolidating in a range above $5,600/ton before slipping at the end of the session in line with lower oil prices. A large rise in U.S. crude stockpiles is still weighing on prices.

Prices in dollar a metric ton.
3 Months Metal     Bid-Ask        Change from
                                 Wednesday PM kerb
Copper           5530.0-5540.0      Dn 119
Lead             1560.0-1565.0      Up 1
Zinc             3610.0-3620.0      Dn 9
Aluminium        2692.0-2695.0      Up 14
Nickel          35700.0-35800.0     Up 200
Tin            11400.0-11425.0      Up 405