Nickel gains as stockpiles dwindle

Nickel rose for a second day on the London Metal Exchange, extending a gain yesterday that was the biggest in more than two years, on speculation stockpiles won't be sufficient to meet demand.

Inventories tracked by the London Metal Exchange have fallen 82 percent in the past 12 months. Eramet SA, operator of the world's largest ferronickel plant, said on Thursday it reduced sales to customers and used inventories to cope with a three- month-old strike that has cut production by almost a third.

"Nickel is among the tightest of the metals due to the relatively low stockpiles,'' said John Kemp, a London-based analyst at Sempra Metals Ltd., one of 11 companies trading on the floor of the LME.

Nickel for delivery in three months on the LME increased $925, or 2.9 percent, to $33,425 a ton as of 10.35 a.m. London time. The metal, used in stainless steel, rose 7.4 percent to $32,500 yesterday, its biggest one-day gain since Dec. 20, 2004. Nickel more than doubled last year.

LME nickel stockpiles dropped 156 metric tons to 6,300 metric tons, their third consecutive daily decline, the exchange said in a daily report. That's equal to less than two days of global consumption.

Prices may be supported by supply disruptions and rising stainless steel production. Global stainless-steel output rose 14 percent last year to 27.8 million tons, according to industry consulting company MEPS (International) Ltd.