Nickel prices surged to a one-month high on Monday on prospects for reduced supply, but analysts said the rally could be difficult to sustain. Overall, base metals were boosted by higher Chinese equity prices and hopes for further stimulus in the world's largest consumer of industrial metals.
Three-month nickel on the London Metal Exchange rose more than 3 percent to a session high of $13,690 a tonne. The steel ingredient ended at $13,550 a tonne - up from $13,195 on Friday, when it rose nearly 4 percent.
Expectations of a more balanced nickel market rose last week after the International Nickel Study Group said the global surplus would shrink to about 20,000 tonnes this year as an export ban on nickel ore by top producer Indonesia further crimps production in China.
Also on the radar are production problems at BHP Billiton's Colombian ferronickel operations.
However, Robin Bhar, metals analyst at Societe Generale, said the nickel rally could peter out as prices seemed to have returned to an equilibrium after falling to $12,205 in mid-April, the lowest level since May 2009.
"We would need to see more evidence of a pick-up in demand or a tightening in supply, particularly in China, for this rally really to extend," he said.
Stocks of nickel in LME-registered warehouses have more than trebled to record highs above 435,000 tonnes since mid-2012, but the pace has slowed in the past month. The tailwind for base metal prices on Monday came from Chinese equities, which hit seven-year highs.
"The Chinese data have not been very positive recently and the market is hoping for more," said Stephen Briggs, metals strategist at BNP Paribas in London. "This is boosting equities in China and it's also boosting base metals."
Benchmark copper ended up 0.6 percent to $6,065 a tonne, hitting a one-week high earlier.
"Mixed views on Chinese demand are likely keeping the short-sellers mostly on the sideline, continued underperformance in Chinese demand - barring any further major supply disruptions - would likely lead to further pressure on copper prices," J.P. Morgan said in a note.
Aluminium hit $1,848, its highest level in more than two months, and later closed up 0.7 percent at $1,835 a tonne; while tin closed up 2.9 percent at $16,250 a tonne - at a near two-week high.
Lead closed up 2 percent at $2,105, its highest level since October 2014, while zinc rose to $2,314, its highest since November last year, and later closed up 2.5 percent at $2,300 a tonne. Both metals have been bolstered in recent weeks by expectations of supply shortages and market deficits.
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