November 1, 2017 / 11:24 AM / 2 years ago

METALS-Electric vehicle story fuels nickel's jump to 2-year high

* LME/ShFE arb:

* Zinc hits highest in 10 years on tight fundamentals

* Nickel cancelled warrants at 37 percent (Adds closing prices)

By Pratima Desai

LONDON, Nov 1 (Reuters) - Nickel prices rocketed nearly six percent on Wednesday to two-year highs on growing expectations of strong demand from manufacturers of rechargeable lithium-ion batteries used to power electric vehicles.

Benchmark nickel on the London Metal Exchange ended up four percent at $12,785 a tonne from an earlier $13,030, its highest since June 2015. Prices of the metal used mostly to make stainless steel are up around 30 percent so far this year.

“The subject of electric cars is right now not just playing into cobalt and lithium, but also more into nickel, which is considered a laggard among the metals most likely to benefit,” said Commerzbank analyst Eugen Weinberg.

“Market focus is on the future, but supplies of nickel at the moment are good and inventories are high. The current nickel price rise is probably premature.”

SHANGHAI: Nickel futures on ShFE hit their daily limit, which under the Shanghai bourse’s trading rules is 99,340 yuan a tonne, the highest in nearly 11 months.

TOP PICK: UBS recently issued a 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 (EV). It said that battery composition was shifting faster to higher nickel-intensive use than previously modelled.

DEMAND: Wood Mackenzie analysts estimate nickel demand in EV batteries will rise to about 220,000 tonnes in 2025 from about 40,000 tonnes last year.

“When all other battery applications are included, such as consumer electronics and energy storage - another field of potentially substantial future growth - this figure increases to 275,000 tonnes in 2025 - approximately 12 percent of global supply in 2025.”

INDONESIA: The flow of Indonesian nickel ore to China resumed in July following a ban on all exports of unprocessed minerals, including nickel, at the start of 2014.

PHILIPPINES: The Philippines’ environment minister last week said he was hopeful a ban on open-pit mining would be lifted before year-end, enabling the world’s top nickel exporter to lift shipments.

STOCKS: Stocks of nickel in LME warehouses at around 381,000 tonnes account for nearly 20 percent of global consumption. However, cancelled warrants - metal earmarked for delivery - at 37 percent have fuelled worries about a tight market.

ZINC: LME zinc closed up 0.4 percent at $3,277 a tonne from an earlier $3,326 a tonne, its highest since August 2007. Prices have been boosted by expectations of deficits.

ELSEWHERE: Copper was up 1.3 percent at $6,930, aluminium rose 1.2 percent to $2,185, lead gained 2.8 percent to $2,482 and tin added 0.1 percent to $19,400 a tonne.

Additional reporting by James Regan and Josephine Mason; Editing by Elaine Hardcastle

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