Nickel hit a 13-month high on Friday as Indonesia's ban on ore exports kept market supplies tight, though risks are rising that lofty prices will encourage buyers to look for cheaper sources of supply. Aluminium prices were also set for their third weekly gain in a row on a UK court ruling that halted a London Metal Exchange plan to release backlogged stocks of the metal, while copper continued to consolidate after recent 3-1/2 year lows.
Three-month nickel on the London Metal Exchange traded up 1.9 percent to $17,400 a tonne at the close, after earlier striking $17,495 a tonne, its highest since February 20 last year.
Nickel has rallied around 25 percent this year, and is on track for its biggest weekly gain since February 2013.
Prices for nickel ore, used as a substitute for refined nickel by stainless steel plants, have surged in China since the Indonesian ban on unprocessed minerals came into effect this January.
The surge has increased prospects that stainless steel mills will use refined nickel instead of the ore.
"Nickel ore stocks have gone up because those holding them are holding them in tighter hands, (so) stainless mills will at some stage start using refined nickel," said Fastmarkets head of research William Adams.
But he added: "Nickel is running ahead of itself. People are going to start looking for cheaper sources of nickel, be that LME stockpiles or nickel pig iron (made) using higher cost nickel ore from the Philippines."
Rallies in nickel helped some commodity funds to bounce in the first quarter from a 2013 loss.
In industry news, breakthroughs in the way BHP Billiton processes nickel ores could help the world's biggest miner find a buyer for its ailing Nickel West division in Australia.
In other metals, aluminium traded down 0.5 percent at $1,884 a tonne, after hitting its highest since October at $1,902.50 a tonne, with prices up around 4 percent for the year.
Persistently low prices for aluminium have forced production cuts this year just as global demand is finally beginning to perk up. But much of the world's surplus, built up after the financial crisis, is stuck in LME warehouses.
A UK court ruling in favour of aluminium giant Rusal dashed a LME plan to unblock its warehousing system that had been set to come into effect in April.
"The largest new dynamic in aluminium is Rusal's overplaying of the warehouse business, putting a lid on hopes of extra supply availability for the moment," said analyst Mark Keenan of Societe Generale in Singapore.
Copper closed up 0.2 percent to $6,670 a tonne. It is up nearly 6 percent since hitting a 3-1/2 year low of $6,321 a tonne in March.
"Copper got oversold recently but the rebound has been the least energetic. Copper (relative to other metals) is still trading the highest above its cost of production and we are moving into surplus," said Adams.
A weak copper price and tighter financing conditions are forcing mining companies to cut or stall spending on exploration to their lowest levels in four years as they focus instead on axing costs and reducing debt. Lead closed at $2,100 a tonne, down 0.6 percent, tin ended 0.1 percent lower at $23,375, and zinc, untraded at the close, was bid at $2,025 a tonne, down 0.7 percent.