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SYDNEY, Oct 29 (Reuters) – London nickel jumped on Wednesday, adding to a 5 percent gain in the previous session, as worries about declining ore stocks in China set off a buying spree that traders said included purchases by consumers.
Nickel was this year’s stellar pick for investors after a ban on Indonesian ore exports threatened to starve China’s stainless steel mills of a top source of raw material, stoking a meteoric 50 percent rise by May.
By October, however, a relentless rise in London Metal Exchange nickel stocks and higher exports from the Philippines had soothed supply fears and erased almost all of the price gains. LME stocks have surged by almost a third since mid-June to records near 380,000 tonnes, more than ten weeks of supply.
“The markets have put aside supply worries for the past few months and have really focused on the increasing LME stockpiles, which on face value is bearish,” said analyst Daniel Hynes of ANZ in Sydney.
“But they are realising that it’s a lot more complicated than that. (China’s) port stocks of nickel ore are falling,” he said.
China’s mills use nickel ore to make nickel pig iron (NPI), a cheaper alternative to refined nickel in stainless steel. Expectations that mills would use refined nickel in place of NPI once stocks ran dry had lit a fire under nickel prices.
Three-month nickel on the London Metal Exchange leapt more than 2 percent on Wednesday to a two-week high of $15,895 a tonne and was trading at $15,875 tonne by 0727 GMT, up 2.1 percent. Prices advanced more than 5 percent on Tuesday, the biggest daily gain since May.
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