Nickel price rises as stockpiles dip

Nickel gained for a third consecutive day in London, trading within about 1 percent of a record and leading other metals higher, on mounting speculation that dwindling stockpiles of the metal indicate a shortage.

Metal due for delivery from warehouses monitored by the London Metal Exchange, known as canceled warrants, more than tripled to 2,118 metric tons yesterday, accounting for 85 per cent of stockpiles. Inventories of nickel tracked by the LME are at 3,990 tonne, equal to less than one day of global consumption.

"The cancelled warrants are a major issue, and if these drawdowns continue we could be looking at a case of zero stocks,'' Tariq Salaria, a London-based metals analyst at Standard Chartered Plc, said today in an interview.

Nickel for delivery in three months on the LME gained $990, or 2.6 per cent, to $38,490 a tonne as of 12:50 p.m. local time. The contract traded at a record $38,950 on January 26. Nickel, used in stainless steel, has been the best performer among the six main metals traded on the LME this year and in the last 12 months.

Prices have jumped more than six-fold in the past five years as supply failed to keep up with demand from China, the world's largest producer of stainless steel. China's stainless-steel production soared 68 per cent in 2006, the Xinhua News Agency reported this week on its website.

The metal may average $35,057 a tonne this year, 31 per cent more than earlier estimated, Gerald Burg, National Australia Bank's minerals and energy economist, said today in a report. That would be the highest annual average since at least 1986, and compares with an average of $23,223 last year.

Tin rose to a 17-year high for a second consecutive day on speculation that an Indonesian government plan to tighten export regulations and crack down on illegal mining may curb production.

PT Koba Tin, the country's second-largest tin miner, halted shipments and doesn't know when they'll resume after three directors were held by police investigating illegal ore purchases, Malaysia Smelting Corp., which owns 75 percent of Koba, said this week.

Tin advanced $400, or 3.2 per cent, to $13,100 a tonne. Earlier it traded at $13,125, the highest in at least 17 years according to Bloomberg data.

Lead also gained as Xstrata Plc maintained a ``force majeure'' at its Northfleet lead plant in the UK because of disruption to supplies from Australia.

Lead inventories monitored by the LME fell for a third day, by 800 tonne, or 2.3 per cent, to 34,200 tonne, the exchange said in a daily report. They have slumped 49 percent in the past year.

Zug, Switzerland-based Xstrata said last week that rail deliveries to Mount Isa in Australia had been delayed following a cyclone. Force majeure is a legal clause that allows a company to default on a sales contract due to circumstances beyond its control.

Among other LME-traded metals, copper gained $85, or 1.6 per cent, to $5,815, zinc increased $70, or 2.1 per cent, to $3,380 and aluminium advanced $17 to $2,845.