Nickel prices, which hit their highest level since at least 1987 yesterday, may have further to go as dwindling supply comes at a time when demand for the metal is soaring.
Prices for the base metal have more than doubled this year because of rising demand from Chinese manufacturers. Inventories, meantime, have sunk to a record low amid delays in starting new mining projects. That trend will likely continue, strategists said.
“As demand increases, projects aren't coming up nearly as quickly as we would like,” said Bart Melek, senior economist at BMO Capital Markets. “There will be stress on supply as demand is high.”
He expects average nickel prices will be 14 per cent higher next year than this year.
Unlike this spring, when hedge funds and other speculators sent base metal prices soaring, the recent move is based on market fundamentals, Mr. Melek said.
Nickel prices eased a bit Wednesday, dropping $300 (U.S.) to $34,000 on the London Metal Exchange.
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