Nickel notches 3-week high on concerns over sulphur supply
- Benchmark three-month nickel on the London Metal Exchange was up 1.8% at $17,110 per metric ton
LONDON: Nickel rose to a more than three-week high on Thursday as concerns over disruption to traffic through the Strait of Hormuz renewed fears of shortages of key raw material sulphur.
Benchmark three-month nickel on the London Metal Exchange was up 1.8% at $17,110 per metric ton as of 0900 GMT. The metal used to make stainless steel and rechargeable batteries earlier jumped as much as 3.1% to $17,330, its highest since June 23.
“Sulphur supply tightness expectations are fermenting again. For nickel, this mostly means an upward shift in cost expectations for the high-pressure (HPAL) acid leaching process,” analysts from broker Jinrui Futures said in a note, referring to a process used to extract nickel from ore.
Indonesia, the world’s biggest nickel producer, relies on the Middle East for about 75% of the sulphur used to make sulphuric acid for leaching. U.S. and Iranian blockades of the Strait of Hormuz have disrupted shipments.
“These guys in Indonesia had been right at the bottom of the cost curve. They’re now right at the top of the cost curve,” Macquarie analyst Jim Lennon said on a webinar this week, noting that the spike in sulphur prices had resulted in a $10,000 a ton production cost increase.
Furthermore, the Indonesian government is seeking to restrict nickel ore allocations to HPAL producers, Lennon said, adding that the market was waiting to hear the results of midyear applications for extra supply.
Elsewhere, LME copper nudged up 0.1% to $13,599 a ton, helped by weaker U.S. inflation data and hopes of a more dovish Federal Reserve. Around 20% of global refined copper supply is leached.
The metal was also supported by recent withdrawals from LME warehouses, with exchange data on Thursday showing another 18,150 tons of copper warrant cancellations.
The entire LME complex moved higher, with aluminium adding 0.9% to $3,178, zinc gaining 0.9% to $3,579, lead rebounding 1.1% to $1,871.50 after touching a 15-month low on Wednesday, and tin firming 1.3% to $53,305.
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