Nickel prices are at a fresh high in London Metal Exchange trade Friday as the funds return to the market to cover short positions previously sold, brokers note.
LME nickel is at $35,000 a metric ton, up from $34,650/ton overnight, and a 7% rise on the week. This is also a massive 161% rise from the start of January.
Ongoing supply side worries amid strong demand from the stainless steel sector have meant attempts to sell the market lower earlier this week failed, forcing short covering and fund buying, brokers said.
A catalogue of nickel production problems have entered in the last several weeks, exacerbating an already critically tight market in desperate need of fresh output.
News hit the market Thursday that PT International Nickel Indonesia Tbk (INCO.JK) could see lower nickel-in-matte output from Dec. 20 unless there's significant rainfall in the next few days to power its energy needs.
The operations are owned by Brazil's CVRD (RIO), which has also just announced a delay to the long-awaited Goro mine in New Caledonia. Soon after, BHP Billiton (BHP) did the same for its Ravensthorpe nickel mine in western Australia.
Brokers said that given nickel's persistent strength in the face of corrections in several of the other base metals, the "sky's the limit" as prices move further into uncharted territory.
"Funds are now at the core of the move," one broker noted, adding that system-driven trading was kick-starting buying programs and catching market players short.
"This is adding to the buoyant prices, with stop losses being triggered," the broker added.
At 0810 GMT, LME nickel was holding at $35,000/ton.
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