April 30, 2015 / 2:58 AM / 5 years ago

METALS-Nickel jumps on supply concerns; physical market still damp

* ShFE closed Friday; LME closed Monday for holidays

* Aluminium prices seen testing $1,900 then fading -traders

* Coming up: Germany retail sales at 0600 GMT (Adds comment, detail; updates prices)

By Melanie Burton

MELBOURNE, April 30 (Reuters) - London nickel rallied 3 percent on Thursday, echoing gains in Shanghai, as buyers rushed into the contract on pent up supply worries, forcing a flurry of short-covering ahead of a long weekend.

London nickel has defied long held expectations of a deficit, slumping to six-year lows mid-month, as China’s vast stainless steel industry has bought more Filipino ore, after Indonesia banned shipments last year. Mills use the ore to make nickel pig iron (NPI) a cheaper alternative to nickel.

“Today’s rise in nickel was mostly due to fresh longs,” said Jin Yidan, an analyst at Minmetals JingYi Futures

“Long holders were trying to push up prices at the time when many players have already gone for the long-weekend holiday in China. Many people think nickel prices (in China) have bottomed as the economy is expected to improve from now on.”

Three month nickel on the London Metal Exchange (LME) rallied by more than 3 percent to $13,855 a tonne, before trading at $13,765 a tonne by 0703 GMT. Shfe nickel closed up 3.5 percent.

Traders also said nickel shorts on the Shanghai bourse have been forced to buy back their positions because delivery is not yet an option on the front month July futures contract minted late last month.

Reflecting still slowly recovering physical demand, China nickel premiums including cost, insurance and freight eased $10 to $155 this week.

Elsewhere, LME copper was flat at $6,141 a tonne, on worries about the impact of sluggish U.S. growth on global trade and metals demand after the Federal Reserve downgraded its view of the U.S. labour market and economy, just as first quarter growth nearly stalled.

The most-traded July copper contract on the Shanghai Futures Exchange climbed 0.9 percent to 44,240 yuan ($7,134) a tonne. The ShFE will be closed on Friday while the LME will be closed on Monday for holidays.

Growth in the vast factory sector of top metals user China likely stalled in April, reinforcing persistent sluggishness in the economy and arguing the case for more policy easing. A China factory growth reading is due on Friday.

U.S. aluminium premiums AL-PREM have plunged by 20 percent this week, mirroring a downdraft in Asia, while LME prices hovered at nearly three-month highs. A break through the 100-day moving average, sparked buys by momentum-following funds, with further gains seen short term, traders said.

“We will probably get to $1,910, but I can’t see it breaking the 200-day (about $1,920),” said a Hong Kong-based trader.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Three month LME tin ($1 = 6.2012 Chinese yuan renminbi) ($1 = 6.2015 Chinese yuan renminbi) (Reporting by Melanie Burton. Additional reporting by Polly Yam in Hong Kong.; Editing by Joseph Radford and Anand Basu)

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