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The most-traded July nickel contract on the SHFE traded at 106,920 yuan ($17,020) per tonne as of 11.55am Shanghai time, climbing 2,170 yuan per tonne from Wednesday’s close.
Base metals prices on the SHFE are benefitting from follow-through strength this morning after prices rallied on the London Metal Exchange on Wednesday, with investors continuing to grapple with the fallout of the United States’ sanctions on Russia.
“Industrials were higher with the impact of the sanctions against Russia continuing to permeate through the market, as investors rush to secure supply,” ANZ Research noted on Thursday.
“Nickel prices surged… on concerns that the metal may be caught up in any further sanctions,” it added.
On April 6, the US Treasury Department announced sanctions on Russian tycoon Oleg Deripaska’s assets, including UC Rusal. This has in turn led to concerns in the nickel market due to Deripaska’s Rusal holding a 27.8% stake in Norilsk.
“I think it is fear rather than fact at this stage. Given what has happened in aluminium, and that nickel also has a significant Russian share of global production, it is not surprising that people would seek to reduce exposure to that risk,” Guy Wolf, global head of market analytics at Marex Spectron, told Metal Bulletin.
Meanwhile, a decline in Vale’s nickel production in the first trading quarter was another bullish element that has underpinned nickel prices, according to Metal Bulletin analyst Andy Farida.
Total nickel production fell 17.9% which comes to 58,600 tonnes against the 71,400 tonnes in the corresponding months of 2017 while the company aims to optimize margins by placing non-competitive mines on care and maintenance.
In addition, mine outlook from the world’s second largest miner remains hazy after Philippine President Rodrigo Duterte was said to be considering extending the ban on open-pit mining, which has been in place since April 2017, to next year.
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