|16 August, 2019

Shanghai nickel jumps, LME 3-month spread at decade high amid supply worries

The most active nickel contract on the Shanghai Futures Exchange rose as much as 3.7% to $18,142.55 a tonne

Molten nickel is poured at Nadezhda Metallurgical Plant of the Norilsk Nickel company in the Arctic city of Norilsk January 23, 2015. Image used for illustrator purpose

Molten nickel is poured at Nadezhda Metallurgical Plant of the Norilsk Nickel company in the Arctic city of Norilsk January 23, 2015. Image used for illustrator purpose

REUTERS/Polina Devitt

SINGAPORE - Shanghai nickel prices surged, while a key indicator of supply shortage jumped to a decade high on Friday, amid ongoing worries about supplies disruption from top ore producer Indonesia.

The most active nickel contract on the Shanghai Futures Exchange rose as much as 3.7% to 127,700 yuan ($18,142.55) a tonne, hovering near a record high of 128,020 yuan hit on Monday.

Meanwhile, the premiums of LME nickel cash over three-month contract jumped to $40 a tonne, a decade high, signalling tight nearby supplies and amid ongoing concerns over potential supply disruption from top ore producer Indonesia.

Markets have been worried over a possibility that Indonesia, the world's biggest nickel ore producer, could bring forward an export ban on mineral ore, due in 2022, to as early as this year, as it wants to boost value of exported products.

Indonesia's President Joko Widodo said on Friday the country should push further to develop a downstream industry domestically to process natural and mineral resources including bauxite and nickel.

He is due to make a decision whether to bring forward the ore export ban.

FUNDAMENTALS

* CHINA OUTPUT: China produced 801,000 tonnes of refined copper in July, up 4.8% year-on-year, while alumina output was up 2.9% in the same period to 6.22 million tonnes, official data showed.

* CONFLICTING MESSAGES: U.S. President Donald Trump said U.S. and Chinese negotiators were holding "productive" talks and expected them to meet in September. Meanwhile, China vowed to counter the latest U.S. tariffs but called on the United States to meet it halfway on a potential trade deal.

* "A meaningful trade deal is unlikely to be reached before the next US Presidential elections in late 2020. We expect most base metal prices to remain weak over the coming months... with the exception of nickel which continues to show resilience due to supply-side fears in Indonesia," Fitch said in a note.

* COPPER STOCKS: Copper stockpiles in LME-approved warehouses jumped 11% in one session to 301,750 tonnes on Wednesday, latest data showed.

* LYNAS: Malaysia has renewed the operating licence for a rare earths processing plant owned by miner Lynas Corp for six months with new conditions, an extension shorter than investors and industry analysts had expected.

* PRICES: London copper increased 0.2%, aluminium rose 0.2%, nickel edged up 0.3% and zinc advanced 0.3%. Shanghai copper rose 0.2%, aluminium edged up 0.1% while lead jumped 1%.

(Reporting by Mai Nguyen; Editing by Rashmi Aich and Uttaresh.V) ((mai.nguyen@thomsonreuters.com; +6568703518; Reuters Messaging: mai.nguyen.thomsonreuters.com@reuters.net))

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