LONDON: Nickel rose to a more than three-week high on Thursday as concerns over shipping disruption in the Strait of Hormuz rekindled fears of a shortage of sulphur, which could affect Indonesian producers of the metal.
Benchmark three-month nickel on the London Metal Exchange was up 2.3 percent at USD17,195 per metric ton at 1600 GMT. The metal used to make stainless steel and rechargeable batteries earlier jumped as much as 3.4 percent to USD17,370, 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 acid leaching (HPAL) 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 percent of the sulphur used to make sulphuric acid for leaching. US 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,” Macquarie analyst Jim Lennon said on a webinar this week, noting that the spike in sulphur prices had resulted in a USD10,000-a-ton HPAL production cost increase.
Furthermore, Indonesia is seeking to restrict nickel ore allocations to HPAL producers, Lennon said, adding that the market was waiting to hear the results of mid-year applications for extra supply.
Elsewhere, LME copper edged up 0.1 percent to USD13,587 a ton, helped by weaker US inflation data and hopes of a more dovish Federal Reserve. Around 20 percent 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. LME copper stocks of 300,600 tons are the lowest since March.
The entire LME complex was trading higher. Aluminium added 1.3 percent to USD3,190, zinc gained 1.3 percent to USD3,592, lead rebounded 1.2 percent to USD1,873 after touching a 15-month low on Wednesday on ballooning inventories, and tin firmed 0.8 percent to USD53,210.