LONDON: Nickel prices soared to 11-month highs on Monday as expectations of robust demand from stainless steel mills spurred fresh purchases, while industrial metals overall were supported by a lower dollar and healthy growth in top consumer China.
Benchmark nickel on the London Metal Exchange was up 0.2% at $15,685 a tonne at 1601 GMT from an earlier $15,815, the highest since November last year.
"Few anticipated the remarkable recovery in Chinese and Indonesian stainless steel production, particularly of the high-nickel 300-series grades," said Macquarie analyst Jim Lennon.
"Preliminary soundings for October suggest production will remain solid at near record high levels, with Indonesian production rising to new record highs."
Also behind higher prices are delays to planned expansions of production capacity in Indonesia until next year.
"Following surpluses earlier this year, there could be a narrowing in the current quarter and indeed even a small deficit in first quarter of next year. After that surpluses will re-emerge," Lennon said.
Global demand for nickel is expected at 2.52 million tonnes in 2021 from 2.32 million tonnes this year, the International Nickel Study Group (INSG) said last week.
It said that expectations are for a 117,000 tonne surplus this year and a surplus of 68,000 tonnes next year.
Bets on higher prices can be seen in the higher open interest for the LME's nickel contracts.
Base metals were supported by Chinese gross domestic product growth at 4.9% year on year in the July to September quarter, below the consensus but above the 3.2% in the second quarter.
Industrial output, key for metals demand rose 6.9% year on year in September from 5.6% in August.
Also a plus is the lower US currency, which when it falls makes dollar-denominated metals cheaper for holders of other currencies, which could boost demand and prices.
Copper gained 0.6% to $6,779 a tonne, aluminium was down 1% at $1,852, zinc was up 2.1% at $2,487, lead rose 0.3% to $1,758 and tin climbed 1.8% to $18,650.