August 8, 2019 / 12:20 PM / 17 days ago

METALS-Nickel leaps to 16-month high on Indonesian supply fears

* Indonesia could accelerate reintroduction of ore export ban

* Shanghai nickel hits record high

* LME stocks at lowest level since 2013 (Updates with closing prices)

By Peter Hobson

LONDON, Aug 8 (Reuters) - Nickel prices rose more than 7% to a 16-month high on Thursday as fears rippled through the market that major supplier Indonesia could bring forward a ban on exports of nickel ore.

Other industrial metals also gained after strong Chinese export data suggested that demand in the world’s largest metals consumer might hold up better than expected.

Benchmark nickel on the London Metal Exchange (LME) at one stage shot up more than 12% to $16,690 a tonne, equalling an April 2018 high, before retreating to close at $15,880, up 7.2%.

The most-traded nickel contract on the Shanghai Futures Exchange (ShFE) climbed 6% to a record high of 124,890 yuan ($17,732.50) a tonne.

The metal used in stainless steel is up around 50% this year on the LME.

The upward price momentum was driven by uncertainty over Indonesia’s plans to ban ore exports and the potential for a renewed stoppage to create shortfalls in China, said ING analyst Wenyu Yao.

INDONESIA: The country’s ban on ore exports was relaxed in 2017 for a period of five years.

It remains unclear if the government will reintroduce it earlier than that. An Indonesian official told Reuters on Thursday that this remained “uncertain”, and Indonesia’s nickel miners association said the group has “indirect” knowledge of a plan to bring forward the date of enforcement.

Nickel could fall around $2,000 if the ban is not announced over the next 1-2 months or rally $2,000 if a ban is announced, analysts at Citi said.

NICKEL TIGHTNESS: The discount for cash nickel against three-month metal on the LME has shrunk to $7 a tonne from about $80 in June, pointing to lower nearby supply. MNI0-3

Stocks of nickel in LME-registered warehouses have fallen to some 140,000 tonnes from around 370,000 tonnes at the start of 2018, the lowest level since 2013. One dominant holder controls between 50% and 79% of warrants. MNISTX-TOTAL <0#LME-WHL>

Inventories in ShFE warehouses have tripled to almost 30,000 tonnes since June but are far below levels in 2016 and 2017. SNI-TOTAL-D

OPEN INTEREST: On both the LME and ShFE, open interest in nickel is at or near record highs. MNI-OI-TOT

CHINA: Exports from China unexpectedly returned to growth in July on improved global demand, but the rebound could be short-lived as Washington prepares more tariffs on Chinese goods.

China’s commodities imports surged in July, with unwrought copper imports bouncing back after two months of declines and copper concentrate imports hitting a record high.

MARKETS/YUAN: The export data helped Chinese stock markets and the yuan currency to steady after steep falls in recent days.

OTHER METALS: LME copper ended up 1.7% at $5,798 a tonne, aluminium rose 1.9% to $1,778, zinc gained 1.9% to $2,304, lead climbed 3.4% to $2,070 and tin finished 0.6% higher at $16,855.

Reporting by Peter Hobson; Additional reporting by Mai Nguyen, Melanie Burton and Tom Daly; Editing by David Goodman, Jan Harvey/Alexandra Hudson/Jane Merriman

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