Nickel prices surged to their highest in a year overnight, propelled by buying from speculators and industrial consumers worried about potential future shortages.
A key ingredient in batteries for electric vehicles (EVs), nickel could be subject to increasingly heavy demand with an expected shift from diesel and petrol cars in the coming years.
"We've been hearing about consistent strong Western consumer buying as the main driver of the price, probably related to EV nickel hedging requirements," said Nicholas Snowdon, metals analyst at Deutsche Bank in London.
Current estimates peg the future supply situation as less critical than forecasts from a year ago, but industrial buyers remain nervous about availability, Snowden said.
"The balance has softened from a sizeable deficit to close to balance," he said.
"But it's not a sudden swing back to significant surplus and ample availability, so I think there's still a concern over making sure that you have enough raw materials."
As nickel prices ramped up, buying from speculators extended the rally, one broker said.
"It's CTA (commodity trading advisers) momentum buying ... that is pushing things (nickel) higher."
CTA funds often base trading decisions on chart patterns and technical levels, including momentum.
Benchmark three-month nickel on the London Metal Exchange (LME) climbed 3.2 per cent to $US14,090 a tonne in closing open outcry activity after touching $US14,200, its highest since last July.
Prices of nickel, mainly used in the stainless steel industry, have also been boosted by worries of restricted ore supplies from major producer Indonesia because of a planned 2022 export ban.
LME nickel has been the best-performing base metal this year with gains of 31 per cent while most other base metals have fallen.
LME copper closed 0.5 per cent firmer at $US6,012 a tonne, having hit a two-week high of $US6,037.50 after Rio Tinto flagged a cost blowout of up to $US1.9 billion and a delay of up to 30 months at its Oyu Tolgoi underground copper mine in Mongolia, the miner's key growth project.
During the first five months of the year the global zinc deficit increased to 123,000 tonnes from 103,000 in the same period last year, data showed.
The lead deficit, meanwhile, rose to 42,000 tonnes from 34,000 tonnes.
LME three-month aluminium ended 0.4 per cent higher at $US1,850 a tonne after touching a two-month peak of $US1,856.50 despite data showing LME on-warrant aluminium inventories grew by nine per cent over the past two days.
China's June alumina output rose 5.4 per cent to 6.41 million tonnes, the aluminium raw material's highest in more than two years.
LME zinc finished 1.6 per cent up at a two-week high of $US2,482 a tonne, lead firmed by 0.2 per cent to $US1,985 after touching the highest since April 4 at $US1,995, while tin was up 0.6 per cent at $US18,000.
