Nickel is once again stealing the limelight by hitting new record highs in London Metal Exchange trade Friday and traders said prices look set to push higher still as supply concerns continue.
Because the market is critically tight, players have been reluctant to get caught short and as a result have little reason to sell.
By the end of Friday's open outcry sessions in London, LME nickel hit $36,250 a metric ton, a 3% gain on the day and up 11% on the week. Since the start of the year, nickel has gained a staggering 21%.
The current focus of supply side concern is the looming strike at Xstrata PLC's (XTA.LN) Sudbury works. Over 1,000 unionized workers voted 98% in favor of a work stoppage if a new labor agreement isn't reached by the end of the month.
Traders said the vote to strike was normal, and the situation is being blown out of proportion because a deal could soon be reached.
But others noted the history of protracted strikes at some of Canada's metals and mining operations, including Sudbury, and warned it would be foolish for a market player to be caught short.
Traders had expected some of the heat to be taken out of the nickel price after a four-month strike at Eramet SA's (13175.FR) New Caledonia operations ended overnight. The company lost between 4,000 and 5,000 tons of output with the Doniambo smelter having been down 50 tons a day since Sept. 25.
"Even if the strike's over, the loss of metal is significant to the market because it's so tight," one LME trader in London said.
In the same vein, news that the cargo of at least 1,000 tons of nickel on board damaged container ship the MSC Napoli will be rescued failed to damp supply worries. The ship's agent, Geneva-based Mediterranean Shipping Co., or MSC, told its customers that Napoli is being towed into the port of Le Havre with its cargo intact. Deliveries of the ship's metal cargo, some of which was destined for customers in South Africa, will now be late.
Customers won't be able to go to the market to source material, because there's just 4,410 tons available to the market out of a total 5,178 tons in LME warehouses.
In contrast, LME copper followed crude oil futures modestly higher at the end of an otherwise dull session and brokers said a lack of interest in the nearbys could see prices slip lower next week.
Much will depend on whether physical buyers return, brokers said. Activity in this area has started to pick up of late in the U.S. in particular, a positive sign for a market that seemed awash with copper at the end of last year.
Aluminium was also steady either side of the $2,700/ton level with interest continuing to focus on the nearby tightness. Almost 28,000 tons of aluminium was attracted into LME warehouses this week by the backwardation, and more is likely to follow as long as this persists.
A hedge fund is said to be sitting on most of the warrants for physical metal, meaning any tightness won't ease overnight.
And the same fund has built a large net short position on the LME, opposite to its physical long.
Zinc meanwhile looks technically weak towards $3,600/ton while lead attracted interest from commodity trade advisory players at the end of the session, ending 3% up on the day.
Prices in dollar a metric ton.
3 Months Metal Bid-Ask Change from
Thursday PM kerb
Copper 5600.0-5605.0 Up 70
Lead 1570.0-1575.0 Up 10
Zinc 3645.0-3650.0
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