Base metals close firmer on LME; Nickel at new high

Nickel took center stage at the London Metal Exchange, rising to a fresh all-time high on the back of supply concerns and general strength seen in the base metals Thursday, with prices likely to trade higher in the near term.

LME three-month nickel soared to a record high of $34,850 per metric ton, driven by supply concerns in Indonesia and general buying interest seen in other base metals markets, said a base metals analyst.

PT International Nickel Indonesia Tbk (INCO.JK) said Thursday that its nickel-in-matte production is likely to fall on Dec. 20 unless there's significant rainfall in the next few days to power its energy needs.

Lower-than-average rainfall since October, along with an apparent delay in the arrival of the rainy season in Indonesia, which typically falls between December and March, has resulted in falling reservoir levels, PT Inco said.

PT Inco is currently producing at a rate of about 1,400 metric tons to 1,500 tons of nickel-in-matte a week. Production cuts may result in PT Inco just missing its current production estimate for 2006 of approximately 71,000 tons of nickel-in-matte, the company said.

"With the nickel market continuing to be extremely tight, any lost production is likely to be reflected in upward pressure on the metals price," according to BMO Capital Markets in a note.

Elsewhere on the LME, lead rebounded from Wednesday's 8% drop as LME data showed inventories drop by 250 tons Thursday.

Tin prices also held above $10,000/ton due to a drawdown in stock levels and by ongoing supply concerns over Indonesia's tin production after a recent clampdown on independent smelters, which is likely to continue underpinning prices.

Meanwhile, LME zinc prices pushed higher, holding above $4,300/ton on the back of tight supplies. Zinc stocks fell 500 metric tons to 85,950 tons Thursday, according to the LME.

Peru's output for zinc production was 97,364 tons in September, a decline of 7.5% from the same month a year earlier, led by a 37% decline in output at Minera Atamina and a 5.0% decrease at Compania Minera Volcan SAA (VOLB.VL), Peru's Energy and Mines Ministry said Thursday.

Despite an increase in LME copper stocks, copper prices held above $6,700/ton, supported by general base metals buying interest.

3 months metal (prices in dollars a ton)
Bid – Ask, Change from Wednesday PM kerb

Copper 6770.0-6780.0 Up 55
Lead 1665.0-1668.0 Up 25
Zinc 4345.0-4350.0 Up 75
Aluminium 2863.0-2864.0 Up 65
Nickel 34725.0-34750.0 Up 1475
Tin 11050.0-11075.0 Up 105