Base metals rose, with nickel hitting $24,000 a ton for the first time in more than a decade, and tin set a new record for supply growth and monetary easing in China .
Metal supplies are dwindling as the world recovers from the pandemic. All major contracts on the London Metal Exchange are forward, a condition in which cash delivery prices are higher than futures, signaling supply constraints.
Nickel supplies held by the LME remained unchanged on Thursday after falling for 56 straight days. The nickel market hit its lowest level since 2007 earlier this week after a stock market decline, which necessitated closer monitoring from the exchange.
Two-day nickel profits hit more than 10% at one point as Chinese lenders slashed funding costs for the second month in a row after the central bank slashed political loan rates and promised further easing for stimulate the economy. China’s real estate sector was a mainstay of demand for metals and came under pressure from tighter credit conditions. Tensions over Ukraine also increase the potential for disruptions to exports from Russia, a major nickel producer, Morgan Stanley said.
“In addition to the latest liquidity easing from China, extremely tight metal supply is a key driver of the rally,” said Wang Yue, an analyst with Shanghai East Asia Futures Co. In nickel’s case, “demand from electric-vehicle batteries is so strong that immediate supply can’t keep up,” he said.
Production at the China-backed Tagaung Taung nickel processing plant in Myanmar’s Sagaing region was halted this month after the power outage, researcher Shanghai Metals Market said, citing a report from The Irrawaddy.
The plant produces 85,000 tons of ferronickel per year and is the largest in the country, according to the report. Nickel rose 5.5% to 24,435 dollars a tonne on the LME, the highest since August 2011, and traded at 23,835 dollars at 2:32 p.m. London time. China futures rose to the daily limit. All other major LME metals except lead gained, with copper up 1.2% and zinc up 1.2%.