December 18, 2017 / 10:56 AM / 2 years ago

METALS-Nickel hits three-week high, China demand seen solid

* LME/ShFE arb: bit.ly/2wZSAEz

* GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl

* LME nickel stocks are about 70 days’ consumption (Adds closing prices and dollar)

By Pratima Desai

LONDON, Dec 18 (Reuters) - Nickel hit three-week peaks on Monday after China boosted expectations of higher demand by pledging to cut export taxes on some steel products, but sizeable inventories capped gains.

Benchmark nickel on the London Metal Exchange ended up 2.2 percent at $11,830 a tonne from an earlier $11,850, its highest since Nov. 27.

Prices of the stainless steel ingredient are up about 6 percent since Friday, when the Chinese news was announced.

“Nickel stocks are huge, about 70 days’ consumption,” said Oxford Economics commodities analyst Dan Smith.

CHINA: China said it would cut export taxes on some steel products and ditch those for sales abroad of steel wire, rod and bars from Jan. 1, which could boost shipments.

DEMAND: China accounts for around half of global nickel demand estimated at 2 million tonnes this year. Stainless steel mills account for two-thirds of global demand.

INVENTORIES: Stocks of nickel in LME-approved warehouses at 373,314 tonnes MNISTX-TOTAL are down from levels above 470,000 tonnes in June 2015, but double the levels seen in May 2013.

DEFICIT: The nickel market was in a deficit of 65,700 tonnes in the first nine months of this year, according to data from the International Nickel Study Group, helping to keep inventory levels steady.

POSITIONING: Traders said funds cut short positions - bets on lower prices - after China’s announcement on steel export duties. Funds’ net long nickel position LME-NI-MNET on the LME at 15,354 lots or more than 92,000 tonnes as of Dec. 8 was down from above 40,000 lots on Nov. 1.

SUPPLY: Analysts say the gradual lifting of a government ban by major producer Indonesia on raw material exports, imposed in early 2014, has seen more nickel ore make its way onto world markets, particularly to China.

TECHNICALS: Nickel is struggling to hold above the 55-day moving average around $11,620. Strong support sits at $11,375, where the 21- and 100-day moving averages are converging.

BATTERIES: Lead prices closed up 1.4 percent at $2,561 a tonne from an earlier $2,567, the highest since Oct. 16. It has been bolstered in recent weeks by expectations of strong demand from auto battery markers over the winter.

WARRANTS: A large position holding between 40 and 49 percent of lead warrants and cash contracts is fuelling worries about shortages on the LME market.

The premium for the cash MPB0-3 over the three-month contract rose to $24 a tonne at the close.

DOLLAR: Base metals were helped by a weaker U.S. currency, which when it falls makes dollar-denominated commodities cheaper for holders of other currencies.

OTHER METALS: Copper rose 0.3 percent to $6,905 a tonne, aluminium gained 0.4 percent to $2,074, zinc slipped 0.3 percent to $3,196 and tin gained 1 percent to $19,350 a tonne.

Editing by Dale Hudson and David Evans

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