Nickel bounced from a five-month low on Tuesday as investors regarded a sharp downtrend as overdone given an export ban on ore from Indonesia from 2020 is expected to tighten the market. Three-month LME nickel gained 0.5% to $13,405 a tonne in final open-outcry trading, reversing after touching its weakest since July 10 at $12,900.
The lows were hit after a surge in inventories at exchange warehouses highlighted an overhang of hidden stocks. On-warrant inventories - material not earmarked for shipment - in depots certified by the London Metal Exchange surged by 40% to 51,264 tonnes, LME daily data showed on Tuesday.
LME nickel prices have slumped by nearly a third since touching a five-year peak in early September, partly owing to a weak stainless steel market, the main source of nickel demand. But in September, Indonesia said it will stop nickel ore exports from the start of next year, two years earlier than initially indicated.
"Given the Indonesian export ban from January, there's probably scope for the price to move higher next year," said Kieran Clancy, assistant commodities economist at Capital Economics. "But there's a bit of a wild card to the extent to which there are stocks left off the official numbers. Our estimates are that there's about 300,000 tonnes of unreported nickel sitting off exchange."
The discount of cash LME nickel to the three-month contract rose to $66 a tonne, the biggest discount since mid-July and compared with a premium of $214 in October. Citi's construction activity indicator for China jumped 22% year-on-year in November to record high levels, the bank's Max Layton said in a note. Construction is a top source of demand for industrial metals.
Copper was lifted by buying from Commodity Trading Advisor (CTA) funds and from Chinese investors, Alastair Munro at broker Marex Spectron said in a note. LME copper rose 0.4% to end at $6,100 a tonne, the highest since July 19.
The cost to roll over an LME aluminium position for one day jumped to as much as $5 a tonne, the highest in two months, indicating near-term shortages of metal in the LME system. Traders said the move could be linked to one major holder accounting for 50-80% of aluminium inventories.
Under LME regulations, a dominant position holder must provide metal to others at capped rates. Three-month LME aluminium slipped 0.1% to finish at$1,755 a tonne.
Sentiment was dampened by news that auto sales in China fell for a 17th month running in November, with sales of new energy vehicles contracting for a fifth month in a row. Zinc fell 0.5% to close at $2,227.50 a tonne, lead added 0.7% to $1,907 and tin gained 1.6% to $17,390, the highest since Sept. 12.
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