LONDON: Nickel soared 9 percent to a three-year high on Thursday, extending the previous session's blistering rally on fears the metal could become ensnared in US sanctions on Russian firms, although analysts say gains could be short-lived.
The United States last week slapped sanctions on major Russian aluminium producer Rusal and traders fear the move may be broadened to hit Russia's Nornickel, the world's second largest producer of the metal.
Nornickel is linked with both Rusal and sanctioned Russian oligarch Oleg Deripaska.
Three-month nickel on the London Metal Exchange rallied 9.3 percent to $16,690 a tonne overnight, the highest since December 2014. The metal was last bid up 3.3 percent at $15,780 in official midday rings, adding to Wednesday's 7.5-percent spike.
"The US can't afford to (impose sanctions on) Nornickel because they are so heavily reliant on (its) palladium. The question is how the situation will evolve if tensions tighten between Russia and the US, that's what the market is currently playing," said Julius Baer analyst Carsten Menke.
But he added: "If any commodity moves more than 10 percent in two days, its either a severe disruption to supplies, which we don't have in this case, or its speculators. In case of nickel it's the latter, the rally is absolutely overdone."
Russian news agencies reported on Wednesday the US administration had informed the Russian embassy in Washington that it had no immediate plans to impose new sanctions.
NICKEL DEFICIT: The global nickel market deficit narrowed to 2,500 tonnes in February from a revised deficit of 15,800 tonnes in the previous month.
ALUMINIUM PRICE: Aluminium hit its highest level in almost seven years at $2,718 a tonne and later traded up 1.9 percent in rings at $2,585. The light metal has risen by nearly a third since the April 6 sanctions imposed on Rusal, the world's No. 2 aluminium producer.
NATIONALISATION: A temporary nationalisation of Rusal is one of the options for helping the company, a Kremlin spokesman said on Thursday.
RUSAL STOCKPILING: Rusal is stockpiling large quantities of aluminium at one of its plants in Siberia because US sanctions have prevented it from selling the metal to customers, five sources close to the company said.
NOVELIS: Novelis Corp, the world's biggest producer of rolled aluminium products, said it would no longer purchase metal produced by Rusal.
SHANGHAI NICKEL TRADING FEES: China's Shanghai Futures Exchange will adjust its intraday transaction fee for July nickel futures after they rose 4.3 percent on Thursday.
OTHER METALS: Copper traded down 0.6 percent in rings at $6,980 a tonne, zinc was last bid down 0.7 percent at $3,243, lead traded down 1.1 percent at $2,350 while tin traded up 0.4 percent at $21,550.
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