LME Nickel Rally Fuels Substitution Worries

LME nickel's record price rally and next target at $40,000/ton basis 3-month is justified given "minimal" LME stock levels, but traders note concerns about demand destruction as record prices fuel substitution. "Nickel consumers will reduce nickel content in their applications. At some point, the prices will have to break down; but for now, it's difficult to say when," trader says. First level of pullback at $35,000/ton. Short-term nickel outlook also firm on strike threat at Xstrata's (XTA.LN) Sudbury nickel operation in Canada. LME 3-month nickel last at $37,800/ton, up $50 on Tuesday PM kerb.