Nickel price hits three-week high on Indonesia supply risks, Fed view

Nickel jumped to a three-week high as expectations for Federal Reserve interest rate hikes faded, while uncertainty over mining policy in top producer Indonesia clouded the supply outlook.

The battery metal climbed as much as 3.1%, leading gains on the London Metal Exchange, after softer-than-expected US producer prices prompted traders to scale back bets on Fed tightening. Higher rates typically weaken demand for metals by raising borrowing costs for manufacturers.

Investors are still assessing the outlook for nickel mining quotas in Indonesia, which accounts for more than 60% of the global supply. Miners were set to apply for higher production quotas at the start of this month, but the government has not yet provided clarity on the process.

Smelter activity in Indonesia has been declining over recent months after a reduction in mining quotas, satellite-tracking firm Earth-i said on Thursday. The firm’s index of inactive capacity in the country now stands at 17.2%, an 8.4 percentage-point rise year-on-year.

Nickel traded 2.4% higher at $17,205 a ton by 11:53 a.m. local time on the LME. Aluminum rose 0.7% and copper edged up. Lead rebounded 1.1%, after coming under pressure as Trafigura Group made a second record delivery of the metal into LME warehouses on Wednesday, people familiar with the matter told Bloomberg News.

(By Annie Lee)