Nickel pared a second weekly advance last week as bulls booked profit after earlier bets on reduced supply of the metal paid off.
Bullish signals from Chinese buying, receding stockpiles and a crackdown on miners in the Philippines pushed metal to near a one-year high this week. On Thursday, nickel’s relative- strength index rose above 70, a level some traders think shows prices are overbought.
Profit taking began after the metal touched $10,900 a metric ton on Thursday, according to Dee Perera, a London-based analyst at Marex Spectron Group. “Having been yesterday’s outperformer, nickel is lagging,” Perera said in an e-mailed note.
Nickel for delivery in three months on the London Metal Exchange fell 3.3% to settle at $10,410 a metric tonne last week, reducing its weekly gain to 1.3%. Prices reached the highest since August on Thursday.
The metal used in stainless steel is the best performer on the Bloomberg Commodity Index in the past month as an audit of miners in the Philippines stoked concern that supply would be curbed just as banks and producers see a shift to a global deficit.
The nation is the top supplier of nickel ore. Goldman Sachs Group has forecast a rally to $12,000, while Australia & New Zealand Banking Group said sticking to strict environmental laws in the Philippines puts at risk almost a quarter of world mine supply.
“Investors have been worried about supply disruptions from the Philippines,” said Jia Zheng, a trader with Soochow Futures Co, forecasting that nickel will remain strong in the short term. “Refined nickel supplies have been contained by ore tightness.”
China more than doubled imports of the refined metal to a record in the first half, while buying of ore fell, according to data Thursday. Shipments of refined nickel reached 229,600 tonnes, including 37,013 tonnes in June, as deliveries of ore sank 24% to 11.2mn tonnes.
While still elevated, refined stockpiles in LME-tracked warehouses have dropped to the lowest level since October 2014 and are headed in July for a sixth straight monthly contraction. The holdings fell to 375,360 tonnes on Friday, down 15% this year. The five-year average is about 268,000 tonnes.
The Philippine government has pledged to shut mines that fall short of environmental and welfare standards. Environment Secretary Gina Lopez said Wednesday the state plans to halt shipments from an idled mine owned by Nickel Asia Corp as a review is conducted.
GMK Norilsk Nickel PJSC, which rivals Vale SA as the top producer, forecast in June that global demand will eclipse supply by 60,000 tonnes this year and 100,000 tonnes in 2017. Still, it cautioned there probably won’t be a big jump in prices because of the high inventories.
Most metals in Shanghai dropped on Friday along with other commodities such as steel rebar as expectations for looser policies were tempered following a recent rally, according to Xu Maili, an analyst with Everbright Futures Co.
“We can see the market sentiment is weakening lately; essentially prices have rallied quite a bit,” said Xu. “From a data point of view, it’s been bland.”
In London, copper, zinc, lead and tin also fell, while aluminium rose.