LONDON -(Dow Jones)- London Metal Exchange nickel hit an all-time high of $20, 000 a metric ton Tuesday afternoon as the metal's rebound in fundamentals serves to attract fund buying, analysts said.
Nickel prices extended to $20,050/ton, up 3.5% on the Monday PM kerb as bullish comments on an extended rebound in the stainless steel sector boost sentiment while Inco Ltd.'s (N) (N) labor contract at its Sudbury operation expires at end-May, with negotiations still ongoing.
Two-thirds of nickel demand are from from the stainless steel sector.
Technical momentum has also turned strongly bullish once prices breached $19, 000/ton, leading momentum-based funds to buy, analysts said.
"The (stainless) steel market experienced sharp cutbacks last year but now we're seeing re-stocking and a rise in end-user demand," analyst Maqsood Ahmed at Calyon said.
"But now the market is at risk from substiution while funds are dominating prices," he added.
The rebound stainless steel demand will likely push the nickel market into a 27,000-ton deficit for 2006, Macquarie said in a research note this week, while LME inventories have been steadily falling.
Currently LME nickel stocks are at 27,948 tons, down from 35,994 tons at the beginning of the year.
Part of nickel's rally is fueled by copper's surge on fund buying to a record high on $7,230/ton, a $442 gain on the day, or 6.5%.
"The whole complex is moving up, with illiquid trading conditions on copper pushing participants to trade elsewhere," a trader said.
SHN Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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