Nickel hits 19-yr high on supply fears

Nickel touched its 19-year high, on a three-month basis, on the London Metal Exchange (LME) on supply fears following a French court order asking to halt civil construction on Goro Nickel's 60,000-tonne plant over environmental issues.

Analysts believe the current surge in nickel prices might be because of speculative buying amid supply fears.

The silvery white metal climbed $400 or 1.2 per cent to $32,800 a tonne "� the highest level since 1987 "� in early trade today.

The $2 billion plant of Goro Nickel, scheduled to go onstream by mid-2008, is expected to hit supplies in the long run. A French high court, through injunction, ordered the company to stop the construction of the waste storage site or pay a daily fine of $40,000.

The latest price rise, however, failed to buoy either the LME spot price or the domestic price perhaps because of about 1,500 tonne gain in inventories in a month.

In the global spot market, nickel has witnessed a substantial gain of about 13 per cent in the past week to touch the $34,000 a tonne level today from $30,100 a tonne last Friday. However, the metal has finished short of the $34,500 peak, which it achieved on October 20 this year.

In the domestic market, nickel today hit a fortnight high at Rs 1,860 a kg, gaining about 5 per cent over Thursday's Rs 1,780 a kg level.

Nickel is primarily used as a strengthening agent in the manufacturing of stainless steel, and generally, application of about 6 per cent of the metal contributes towards producing quality-grade stainless steel.

But, since the introduction of low-grade stainless steel in early this century, the demand for nickel has declined to a critically low level.

On the positive side, Posco's plan to start a $720-million stainless steel mill in China with a melting capacity of 6,00,000 tonne is set to fuel its demand. The plant will alone consume over 30,000 tonne of nickel annually.

According analysts, the tight inventory situation continues to underpin prices. Even as LME nickel stocks rose by 150 tonne on Thursday, they continue to be at significantly low levels, totalling 6,500 tonne, of which 1,600 tonne is cancelled warrants.