January 30, 2019 / 12:28 PM / a year ago

METALS-Nickel hits 3-month high on Vale production fears, tight supply

 (Updates with closing prices)
    By Peter Hobson
    LONDON, Jan 30 (Reuters) - Nickel prices rose to a
three-month high on Wednesday as investors worried that one of
the world's largest producers, Brazilian miner Vale           ,
could curtail supply in an already tight market.
    Benchmark nickel         on the London Metal Exchange (LME)
closed up 1.9 percent at $12,350 a tonne. 
    The stainless steel ingredient hit more than two-year lows
on Jan. 2 as concerns over slowing economic growth in China cut
demand expectations, but it has since rallied around 17 percent
as supply deficits reduce exchange inventories. 
    Iron ore and nickel producer Vale on Wednesday said it would
sacrifice production for safety after a tailings dam burst in
Brazil last week, killing at least 84 people.             
    The news pushed Chinese iron ore futures to their highest in
nearly 17 months and stirred the nickel market.                 
    "There is a bit of concern that there could be some impact
on Vale's nickel assets," Deutsche Bank analyst Nick Snowdon
    But it was unclear what, if any, effect there would be on
Vale's nickel output, Snowdon said, adding he expected supply
shortfalls both this year and in 2020 and nickel prices around
current levels were justified. 
    Vale produced 288,200 tonnes of nickel in 2017, around 14
percent of total global output, of which around 25,000 tonnes is
mined in Brazil. 
    NICKEL STOCKS: At 202,032 tonnes inventories of nickel in
LME-registered warehouses are down from around 370,000 tonnes at
the start of 2018 and near the lowest since 2013. MNISTX-TOTAL
    SPREADS: Suggesting that availability of nearby metal is
tightening, the discount of cash nickel compared to the three
month contract has shrunk from around $95 a tonne in July to
around $60. MNI0-3
    WARRANTS: One entity holds between 50 and 79 percent of LME
nickel warrants, increasing concerns over short supplies.
    TRADE TALKS: The United States and China launch a critical
round of trade talks on Wednesday amid deep differences that
will make it difficult to reach a deal before a March 2 U.S.
tariff hike.             
    NORILSK: Russia's Norilsk Nickel           said on Wednesday
its output of nickel from Russian raw material would increase in
2019 to 220,000-225,000 tonnes from 216,856 tonnes in 2018.
    COPPER: LME copper         ended up 1.4 percent at $6,136 a
tonne after 12,500 tonnes of cancellations cut on-warrant stocks
in LME-warehouses to 104,950 tonnes, reversing recent gains and
pushing levels towards October's 13-year low of 56,650 tonnes.
    OTHER METALS: Aluminium         finished up 0.8 percent at
$1,909.50 a tonne, zinc         closed 1.1 percent higher at
$2,686, lead         gained 0.7 percent to $2,090 and tin
        rose 0.6 percent to $20,800.

 (Additional reporting by Tom Daly;
Editing by Alexander Smith and Louise Heavens)
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