London nickel futures hit a fresh record peak on worries about tight inventories, while lead jumped to a new contract high on expectations that the premium for the physical material will rise, traders said.
Lead for three-month delivery on the London Metal Exchange traded at $1,505 a tonne, the highest since the contract switched to dollars from sterling in the early 1990s. Traders said fresh consumer buying emerged on jitters that the premium for physical lead over the cash price on the LME would double later this year.
Lead closed at $1,492/1,495 a tonne from Wednesday's $1,455 and nickel ended up at $30,500 from Wednesday's $30,100/30,150 after an earlier all-time high of $30,600.
"Nickel is getting stronger ... I think copper will recover as well and that would strengthen the whole complex," an analyst in London said.
Investors were betting that limited stocks nickel, used to make stainless steel more malleable, would be insufficient to meet demand in the traditionally strong first quarter.
Stocks jumped 966 tonnes to 4,986 overnight to just over a day's global consumption, but with 2,334 tonnes of that earmarked for delivery, just 2,652 tonnes were available to support the 1.4 million tonne-per-year market. Trade across the metals was low-key with many players still out of the office as the annual LME dinner week winds down. "A lot of the market is missing, either in meetings or travelling back after the LME week," one trader said.
"There is a lack of interest and investors seem quite happy to wait for next week, when volumes will pick up."
In other industry news, China imported 528,953 tonnes of scrap copper in September, 30 percent more than in August. But Chinese imports of copper, including semi-finished products, fell 23.6 percent from a year earlier to 1.5 million tonnes in the first nine months of this year, data showed on Thursday.
Dealers said attention was shifting to low copper stocks, helping to support copper despite bearish expectations for Chinese refined copper demand growth this year.
"As we get to the end of this year and into next, we could see copper spike back up to $10,000 or $12,000. Stocks are low and there is always the chance we could see things rise sharply," the trader said. Copper traded down $25 at $7,490 from Wednesday's close at $7,515, after trading in a narrow range for most of Thursday's session.
Tin jumped $375 to $9,450, zinc was softer at $3,775 from Wednesday's $3,785 and aluminium lost $5 at $2,595. Analysts noted increasing tightness in the market. A month ago three-month aluminium was trading at some $50 higher than the cash price. On Thursday cash prices exceeded the three-month price by $1.50.
In a well supplied market, futures prices typically are higher than nearby prices, reflecting interest, insurance and storage costs for metal, but when material is in short supply, buyers will pay more for cash metal in order to secure their needs.
"The nearby spreads are all beginning to tighten in anticipation of a squeeze around the 20 December 2006," Sempra Metals economist John Kemp said in a report.
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