Nickel soars to four-month high as miner Vale announces force majeure

Nickel hit its highest in more than four months on Wednesday on concerns that a force majeure by Brazil's Vale on some iron ore contracts could lead to restrictions in its nickel supply. Benchmark nickel on the London Metal Exchange (LME) ended 0.9 percent lower at $12,925 per tonne, after it touched $13,350, its highest since Aug. 31, as the dollar firmed.
A Brazilian court forced production to stop at Vale's iron ore mine after a tailings dam burst last month, killing more than 300 people and compelling Vale to tell clients it could not deliver on some iron ore contracts. "The strength in nickel has been largely on worries that Vale's nickel supply might be impacted after the iron ore force majeure," said ING commodities strategist Warren Patterson.
"Whether that is justified though is the question, maybe the market is getting ahead of itself on the nickel side." Vale is the world's top producer of nickel, which is mainly used in stainless steel. Traders said nickel and other metals were also benefiting from an unwinding in short positions. The market ended on Monday with a net long position amounting to 3.8 percent of open interest, broker Marex Spectron said.
Total inventories of nickel in warehouses registered with the LME stood at 200,754 tonnes, down about 45 percent since the beginning of 2018. Exacerbating concerns about the scarcity of the metal, a single entity held between 50 and 79 percent of LME nickel warrants.
Senior US and Chinese officials are poised to start another round of trade talks in Beijing next week to push for a deal to protect American intellectual property and avert a March 2 increase in US tariffs on Chinese goods, two people familiar with the plans said on Tuesday. China's factory activity shrank by the most in almost three years in January as new orders slumped and output fell, a private survey showed, reinforcing fears that a slowdown in the world's second largest economy was deepening.
Lead prices may get a boost as environmental crackdowns on smelters in China curb output in the world's biggest market for the battery metal as inventories tumble. Copper closed 0.8 percent higher at $6,279 per tonne after touching a two-month high and aluminium eased 0.8 percent to $1,907, having scaled its highest since Dec. 24. Zinc retreated from a seven-month high touched on Tuesday, ending 1.3 percent lower at $2,704, lead slipped 0.6 percent to $2,090 while tin ended 0.7 percent higher at $21,000.