Nickel ended at a new record high of $29,200 a tonne on the London Metal Exchange (LME) on Wednesday, rising over six percent as inventories dwindle. "Nobody is bearish...it feels as if all the base metals could go higher again," an LME trader said.
Nickel for delivery in three months ended at $29,200, versus $27,400 and analysts said the next target was $30,000.
Stocks of nickel in LME warehouses rose a net 354 tonnes to 6,162 on Wednesday after deliveries into Rotterdam and Baltimore totalling 720 tonnes. But the amount of metal available to the market fell to 1,374 tonnes as cancelled warrants - metal earmarked for delivery - rose to 4,788 tonnes from 3,600 on Tuesday.
The trader said that he suspected an investor had bet the prices would fall, also known as going short, and was having difficulty getting out of the position.
After the market closed, the LME said anyone with short positions in nickel falling due from Friday who were unable to make physical delivery could defer for one day at a penalty of $300 per tonne.
"Nickel stocks are at historically low levels and we now have a genuine material shortage. Our first priority is to ensure that trading remains orderly and to prevent the risk of settlement defaults," Simon Heale, LME Chief Executive, said.
The premium for cash metal above the three-month price hit $3,500 on Wednesday.
"Low inventories are determining prices and the market will be very volatile," analyst Nick Moore at ABN Amro said.
The dollar softened against a basket of other currencies after the release of US inflation figures that boosted equities, bonds and gold as the data eased pressures on the US Federal Reserve to raise interest rates. "The inflation figures were seen as relatively benign... and that in turn weakened the dollar and this helped the metal prices," an LME trader said.
Copper futures closed at $7,700, up from $7,650. Prices fell after the final bell by nearly one percent on news that striking workers cut their demand for a salary raise to 10 percent from 13 percent to end a 10-day strike at the world's largest copper mine, Escondida. The strike by more than 2,000 workers has cut the mine's roughly 3,500 tonnes of daily production by about 60 percent.
"The production losses (at Escondida) could wipe out half the LME inventory very quickly," Moore told Reuters. Dealers said the market was unlikely to fall if the strike was resolved. "Even if they should find a deal today or tomorrow, I don't think the market will drop very far, the market will just focus on another thing," the first trader said.
Lead closed up $16 to $1,226, but was supported by supply disruptions in Australia. Lead prices have climbed 30 percent since dipping to $928 in mid-June. Lead hit a contract high of $1,435 in the first quarter of 2006.
LME aluminium was $5 higher at $2,501.