Nickel prices surged to their highest in over a year on Wednesday on persistent worries about shortages due to Indonesia's ban on ore exports but copper eased on concerns about economic growth in top metals consumer China. Three-month nickel on the London Metal Exchange touched a peak of $16,718 a tonne, the highest since March 28, 2013 and closed at $16,695, up 1.46 percent.
Nickel has shot up 20 percent this year following a ban on shipments of unprocessed ore by top exporter Indonesia. Nickel prices are due to continue to see support as producers of an alternative to refined nickel in China are expected to cut output on the back of sharp price hikes for ore imports in the wake of the ban.
"With the Indonesian high-grade ore supply tap now firmly turned off, users outside China are reliant on stocks and are scrambling to find replacement ores," said analyst Jim Lennon of Macquarie. "In the absence of a change in Indonesian policy, we think that by 2016, the market will get tighter than it did in 2006/07, when prices traded in the $30-50,000/t range," he said in a note.
Copper, however, closed down 0.8 percent at $6,617 at tonne after hitting a one-week high of $6,710 on Tuesday. China's top economic planning agency said on Wednesday that the world's top metals consumer has less and less room to rely on policy tools to support the economy as the government tries to arrest a protracted slowdown this year.
Last week China unveiled measures to support economic growth such as cutting taxes for small firms and speeding up rail construction, but investors were uncertain whether more stimulus plans would be forthcoming. Copper prices are down about 10 percent so far this year but have recovered by around 5 percent from 3-1/2-year lows plumbed on March 19. "The uptrend is strongly intact since it has bounced from its lows," said Naeem Aslam, chief market analyst at Ava Trade.
"The major support remains at $6,413, and the next resistance is at $6,957." Minutes of the US Federal Reserve's last policy meeting due later on Wednesday will be closely read given that Fed Chair Janet Yellen has rattled investors by suggesting interest rates could rise rather earlier than had been priced in by markets. "We do have the FOMC meeting today, which could bring a little stress for the metal as a result of a strong dollar," Aslam said.
Investors are likely to focus on economic figures from China to gauge the health of the world's second-largest economy and biggest consumer of copper. China's trade data for March is due on Thursday, and first-quarter gross domestic product (GDP) numbers are scheduled to be released next Wednesday. "I don't think the market will chase prices higher, given the Chinese story still has a lot of question marks," said analyst Dominic Schnider of UBS Wealth Management in Singapore.
A surplus in the copper market is expected to weigh on prices this year as demand struggles to keep pace with a ramp-up in mine supply, metals consultancy Thomson Reuters GFMS said. It forecast the metal would post an average three-month price of $6,790 per tonne this year and would likely test $6,000 in the second half. In other metals, tin closed up 0.22 percent at $23,255 a tonne, lead gained 0.77 percent to $2,089 and zinc dipped 0.2 percent to $2,022 after hitting a one-month high at $2,031 in intraday trade on technical buying. Aluminium failed to trade in closing rings and was last bid up 2.1 percent at $1,857 a tonne.