nickel prices soar

Nickel prices soar
June 21, 2004 - 7:30PM

The Age June 21:

Shares in Australian nickel producers returned to favour as concerns over dwindling stockpiles drove up metal prices.

Nickel jumped by over $US1,000, or 7.5 per cent, per tonne on the London Metal Exchange (LME) on Friday as investment funds poured into the market spurring prices to their highest in four months.

Investors were quick to respond, with shares in Australia's biggest nickel producer WMC Resources Ltd gaining more than two per cent during the day before closing up seven cents, or 1.4 per cent, at $4.99.

WMC Resources produced 117,722 tonnes of nickel concentrate in 2003.

BHP Billiton Ltd, which achieved record annual nickel production of 78,100 tonnes for 2002/03, gained 16 cents to $12.48.

Perth-based Minara, formerly Anaconda Nickel, added two cents to $2.57 while Mincor, which last week said it was aiming to increase production by 80 per cent over the next two years, lifted two cents or nearly three per cent, to 74 cents.

Analysts said investors who sold out of the market earlier in the year were looking to buy back in amid fears stockpiles were dropping quickly.

"It's caught the market by surprise," Daiwa Securities resources analyst Mark Pervan said.

"We're seeing fairly active fund buying back in and I think the catalyst to that is the stockpile decline."

Mr Pervan said positive sentiment was returning on the back of strong US and European economic data, while demand out of Asia, particularly China, remained very strong despite earlier suggestions of an economic cool-down.

"This hasn't abated much as was expected," Mr Pervan said.

He said the second half of the year is likely to see an even tighter environment with a seasonal drop in supply from Russia, the world's biggest nickel exporter, as winter sets in and ports out of Siberia ice over.

On Friday the LME reported stocks of nickel in warehouses fell 270 tonnes to 8,464 tonnes, their lowest since March 2001.

Traders said further declines were inevitable.

Inventories were expected to drop below the 2001 low of 8,304 tonnes, and head towards critical levels last seen in October 1991.