(Adds detail, updates prices)
By James Regan
SYDNEY, Nov 1 (Reuters) - Chinese nickel futures rocketed to their daily limit on Wednesday, tracking overnight gains in London as the sector turned positive on the prospect of new demand from electric vehicle battery manufacturers.
Nickel staged a fast ascent on the Shanghai Futures Exchange (ShFE) following strong interest in the London Metal Exchange (LME) three-month benchmark contract on Tuesday.
“What we’re seeing is a reaction to a new demand market for nickel in electric cars, first in London, then in Shanghai nickel,” said Amy Li, a metals analyst for National Australia Bank.
ANZ Bank commodity specialists noted the market was becoming increasingly confident about its place in the electric car movement, with producers and traders at the London Metal Exchange Week annual gathering speaking positively about the growth in demand expected from the sector.
Big swings in prices are not unusual during LME week, particularly when the world’s top traders, producers and consumers of base metals regroup the morning after the annual dinner to discuss the state of the industry and start negotiations over next year’s supply contracts.
This year, in a break from tradition, the big gyration came in nickel rather than copper. Copper is one of the most liquid and heavily traded of the LME’s contracts and is considered the primary benchmark for the global nonferrous market.
UBS issued a client report designating nickel among its top commodity picks over the next two to five years due to the rapid rise in use of electric vehicles, a new source of demand.
It said that battery composition was shifting faster to higher nickel-intensive use than previously modelled.
The rise in demand from batteries comes amid the reintroduction of nickel supply from Indonesia and the Philippines following earlier suspensions in exports from the two countries.
The flow of Indonesian nickel ore to China resumed in July following a ban all exports of unprocessed minerals, including nickel, at the start of 2014.
The Philippines’ environment minister last week said he was hopeful that a ban on open-pit mining would be lifted before year-end, enabling the world’s top nickel exporter to lift shipments.
“This is a demand, not a supply story,” said National Australia Bank’s Li.
* LME NICKEL: LME three-month nickel was up 3.4 at$12,717.50 a tonne by 0722 GMT, building on a 5-percent gain overnight. The contract is at its highest since mid-2015.
* SHFE NICKEL: The most-traded ShFE nickel contract stood 6 percent higher - its daily limit under the Shanghai bourse’s trading rules - at 99,340 yuan ($14,967) a tonne, the highest in nearly 11 months.
* RALLY: ShFE nickel prices have rallied 11.8 percent so far this year, compared to a 27-percent climb in LME 3-month nickel.
* OPEN INTEREST: ShFE nickel open interest is up 45 percent since the start of October at 374,307 contracts, the highest since January.
* SHFE LEAD, ZINC: ShFE lead and zinc also posted strong advances, up 0.91 percent and 1.85 percent respectively, initially tracking firmer domestic steel prices, but holding on to gains even after steel futures backtracked.
* DOLLAR UP: The dollar edged higher as investors awaited the outcome of the Federal Reserve’s policy meeting for clues about future tightening, while the beleaguered New Zealand dollar came roaring back to life on strong jobs data.
Three month LME copper
Most active She copper
Three month LME aluminium
Most active She aluminium
Three month LME zinc
Most active She zinc
Three month LME lead
Most active She lead
Three month LME nickel
Most active She nickel
Three month LME tin
Most active She tin
($1 = 6.6374 Chinese yuan)
Reporting by James Regan; Additional reporting by Josephine Mason; Editing by Vyas Mohan and Tom Hogue