LONDON (Reuters) - Volatile nickel prices jumped 5 percent to outshine its London Metal Exchange rivals on Wednesday, buoyed by supply worries including tensions in Madagascar, fund buying and a weak dollar, analysts said.
A group of senior military officers declared a takeover of power in Madagascar on Wednesday as the island voted on a new draft constitution, but the country’s military leadership vowed to crush any rebellion.
Madagascar is home to the Ambatovy nickel project, which was expected to be completed by early January 2011.
At 1605 GMT, LME nickel traded at $21,810 versus $20,815 a tonne at Tuesday’s close. Stainless steel nickel earlier fell to a near three month low before rising almost 5 percent to hit a session high of $21,879.
“We’ve had a rally — Madagascar is on the horizon,” said Robin Bhar, analyst at Credit Agricole.
The Ambatovy project, a joint venture of Sherritt International, Sumitomo Corp , Korea Resources
and SNC-Lavalin, is expected to produce 60,000 tonnes of nickel and 5,600 tonnes of cobalt per year once it hits full speed, and operate for 27 years.
Sherritt had no comment.
Analyst Leon Westgate at Standard Bank said that Ambatovy was “perhaps another issue adding background support” but that nickel’s move was in part a technical bounce, as well as some bargain hunting.
On the technical level, nickel fell below its 100-day and 200-day moving averages on Tuesday. These chart points are regarded as long-term sell signals by funds.
For a METALS INSIDER column on nickel, see
Nickel had fallen in the last few sessions as deepening euro zone jitters and fears of tighter Chinese fiscal policy sent investors fleeing from risk.
The dollar fell against a basket of currencies after data showed U.S. consumer inflation was subdued in October and new home building slumped to its lowest level in 1-1/2 years.
A weak U.S. currency makes metals priced in dollars less expensive for holders of other currencies.
“The fund selling has finished and some longer term buyers are in — the moves down were all overdone and now some confidence is coming back,” a London-based trader said.