Nickel at Two-Year High as Vale Suspension Fuels Supply Concern

May 8, 2014 08:18 AM

Nickel reached a two-year high in London after Vale SA suspended activity in New Caledonia, stoking concern supply might fall short of reviving demand.

The suspension at the plant was ordered after a spill, according to the island archipelago’s Southern Province government. Nickel surged 41 percent in London trading this year after leading global miner Indonesia barred exports of raw ores in January. The potential for sanctions against Russia also aided prices, according to Societe Generale SA.

“Clearly with the nickel market already tightening on Indonesia and possible sanctions against Russia, this is adding to the general sense that the market is facing a supply shortage over the coming months, if not years,” Robin Bhar, an analyst at Societe Generale in London, said by phone today.

Nickel for delivery in three months gained 4.5 percent to $19,487 a metric ton by 1:48 p.m. on the London Metal Exchange after touching $19,786, the highest level since March 2, 2012.

The spill was yesterday and operations were suspended, Cory McPhee, a Vale spokesman in Toronto, said by e-mail today. “At this point an investigation into the spill and its impacts is underway and I have no forecast on how long the suspension of operations will continue.”


Norilsk Nickel

Russia, which may face Western sanctions after intervening in Ukraine, is home to OAO GMK Norilsk Nickel, the biggest producer of refined metal. The stainless-steel industry is the main source of demand, the Nickel Institute says. Outokumpu Oyj, which delivered 2.59 million tons of stainless steel in 2013, in April predicted better base prices in the current quarter.

The refined-nickel market will move to a 111,000-ton deficit next year from a 19,000-ton surplus in 2014, Barclays Plc estimates show. Indonesia supplies about 30 percent of global mined nickel, according to Deutsche Bank AG.

Vale, the world’s second-biggest nickel producer, is aiming for 40,000 tons of output this year at the New Caledonia site, formerly known as Goro, Gerd Peter Poppinga, executive officer of base metalsand information technology, said in November.

“Acid spills generally tend to be not that significant,” said Bhar at Societe Generale. “If that’s the case, production could be up and running fairly soon. If it’s weeks or months, that will change production outlook for the mine.”

Copper for delivery in three months rose 0.6 percent to $6,693.75 a ton in London and the metal for delivery in July climbed 0.7 percent to $3.055 a pound on the Comex in New York. Lead, tin and zinc climbed on the LME as aluminum fell.

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