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Healthy demand, shortages spur nickel’s climb to decade highs

Nickel prices climbed to their highest in more than a decade on Monday as low inventories, healthy demand from manufacturers of electric vehicle batteries and worries about supplies from Russia spurred buying.

Benchmark nickel CMNI3 on the London Metal Exchange was up 1.5% at $24,515 a tonne at 1049 GMT having earlier hit $24,610 a tonne, the highest since August 2011.

“There will be a risk premium for nickel given the potential for disruptions from Russia and inventories are low,” said ING analyst Wenyu Yao. “Strong electric vehicles sales in China continue to drive the tightness for the nickel that is suitable for making nickel sulphate.

RUSSIA: The possibility of sanctions on Russia if it invades Ukraine are behind concerns about supplies from the country which accounted for about 10% of global mined production last year.

STOCKS: Shortages of nickel have led to draws on stocks in LME registered warehouses , which at 83,274 tonnes have dropped 68% since April last year.

Stocks of bagged briquette MNI-BBRI-TOT, easily crushed into small particles and dissolved in sulphuric acid to make nickel sulphate for batteries, at 62,940 tonnes are down 69% since last April.

Cancelled warrants — metal earmarked for delivery — at 52% suggest another 43,638 tonnes is due to leave the LME system.

SPREADS: Worries about shortages on the LME market have been reinforced by one company holding between 50%-79% of LME nickel warrants and cash contracts 0#LME-WHC.

This has created a premium for the cash over the three-month nickel contract. The premium CMNI3 closed at $465 a tonne on Friday, close to the 15-year high of $570 hit on February 1.

ELECTRIC VEHICLES: Sales of new energy vehicles in China reached 431,000 in January, an annual increase of 135.8%, according to data of the China Association of Automobile Manufacturers.

OTHER METALS: Copper was up 0.1% at $9,967 a tonne, aluminium CMAL3 climbed 0.6% to $3,282, zinc CMZN3 gained 0.5% to $3,592, lead slipped 0.1% to $2,346 and tin CMSN3 fell 0.3% to $24,515.
Source: Reuters (Reporting by Pratima Desai; editing by Kirsten Donovan)

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