Nickel prices fell on Friday as a two-week explosion of speculative buying which helped push the metal used in stainless steel to its highest in more than a year appeared to run out of steam.
Copper meanwhile surged to a two-month high as investors ramped up bets that U.S. interest rates will fall.
Benchmark nickel on the London Metal Exchange (LME) traded down 2.8% at $14,430 a tonne in official rings, but still was up around 7% this week.
Prices on Thursday touched $15,115, the highest since June 2018 and up a massive 20% in just two weeks.
“The rally was driven by technical and speculative buying,” said Commerzbank analyst Daniel Briesemann, predicting that prices would give back most of the gains.
A supply deficit, low stockpiles, solid stainless steel production and the likelihood of future demand for nickel in rechargeable batteries meant prices should eventually rise, he said, though he added: “Not now, and not to this extent.”
INTEREST RATES: Two influential Fed officials on Thursday sharpened their public case for acting, quickly if needed, to support the U.S. economy.
Lower interest rates tend to push commodity prices higher because they mean lower inventory financing costs and raise appetite for riskier assets.
GLOBAL GROWTH: Rate cut bets and rallying equity and bond markets are feeding into a gradual loosening of financial market conditions that could potentially send world growth ticking higher by the end of the year.
TRADE WAR: U.S. and Chinese officials spoke by telephone on Thursday as the two countries seek to end a year-long trade war, with U.S. Treasury Secretary Steven Mnuchin suggesting in-person talks could follow.
The trade dispute has sent industrial metals prices sharply lower because investors fear it will damage demand.
NICKEL STOCKS: Headline stocks in LME-registered warehouses, at 147,942 tonnes, have slid from more than 450,000 tonnes in 2016 and are the lowest in 6-1/2 years.
Adding to worries over supply, between 50% and 79% of LME nickel warrants are held by one entity.
SPREAD: Cash nickel is still trading at a discount to the three-month contract on the LME, however, suggesting that while the market has tightened, metal is still available.
INDONESIA: Nickel prices were supported this week by an Indonesian mining ministry official reiterating that a ban on the export of raw ore exports would be enforced by 2022.
Fear of the ban is unfounded, writes Reuters columnist Andy Home.
COPPER: LME copper traded up 1.6% at $6,077 a tonne after touching $6,149, the highest since May 10. It had risen 2.4% this week.
OTHER METALS: Aluminium traded unchanged at $1,854 a tonne, zinc did not trade but was bid down 1.1% at $2,437, lead traded up 1.4% at $2,077 and tin was bid 0.2% lower at $17,805. (Reporting by Peter Hobson; Additional reporting by Tom Daly; Editing by Jan Harvey and Jason Neely)