Nickel closed higher on the London Metal Exchange (LME) on Thursday and its outlook was strong in quiet market conditions, analysts said. "I think at the moment many players prefer to sit on the sideline and see what happens, but certainly many believe that nickel has great potential to hit new records," economist John Kemp at Sempra Metals said.
Three-months nickel closed at $25,300 a tonne, up $550 from previous session's close, but the metal fell back from Wednesday's record high of $26,600.
The price of nickel has nearly doubled since the start of the year, with a 50 percent gain in the past four weeks alone.
Stocks in LME warehouses dropped 570 tonnes to 7,674, the lowest level in nearly a year. Over half of that total comprised cancelled warrants, or metal earmarked for delivery.
The tight supplies were reflected in the premium for cash nickel over 3-months futures, widening to $2,600 a tonne, up from $975 at the end of last month.
Copper ended down $120 to $7,920 a tonne. On Wednesday, copper recorded an intra-day high of $8,210, a 6-week high.
On the demand side, London metals consultancy Bloomsbury Mineral Economics (BME) expected copper demand to exceed supply by 175,000 tonnes in 2006, BME said in its monthly copper briefing on Thursday.'
However, J.P. Morgan expected demand in base metals to moderate from mid-2006 because of intensifying inflation with central banks looking more hawkish and rising bond yields in leading economies, a report said.
European shares traded at their lowest in two weeks after oil hit a record high above $76 a barrel amid tensions in the Middle East, where Israel struck Beirut airport and blockaded Lebanese ports.
"The recent political problems are obviously pushing oil to new highs, that could be bullish if you think that will cause investors to buy all commodities, but it can be bearish if you think the rise in oil prices could potentially cause an economic slowdown," Kemp said.
Aluminium was down at $2,593 from $2,675. But a data error showed the closing price at $7,593.
Zinc lost $90 to $3,420 and tin closed at $8,700 from $8,850/8,875.
Lead was at $1,130 down from $1,150.