LONDON - Nickel prices climbed to their highest in seven weeks on Thursday as speculators returned to the market on worries that the Philippines could follow Indonesia in banning unprocessed ore exports.
Three-month nickel on the London Metal Exchange soared to a session high of $19,498 a tonne, its strongest since July 14, driven by buying from commodity trading advisers (CTAs) and macro funds, traders said.
The metal later pared gains to end at $19,395 a tonne, up 1.7 percent. It is up nearly 40 percent so far this year.
Nickel hit a 27-month peak of $21,625 a tonne in May after top exporter Indonesia banned unprocessed ore shipments to stimulate its domestic processing industry.
Prices jumped 2.8 percent on Wednesday on the news that a Philippine senator had proposed a ban on raw materials exports.
"We've taken away Indonesian nickel ore and if you also take away Philippines as well, you can wave goodbye to the nickel pig iron (NPI) industry in China," said Nic Brown, head of commodities research at Natixis in London. "So this is clearly a big deal. That's why the market is taking it so seriously."
After nickel's May peak, prices drifted lower and many speculators closed long positions, but the market is likely to extend gains as they re-enter the market, Brown said.
"We expected to see prices above $20,000 a tonne at some point in Q4 going into Q1 next year. But we could get there rather sooner than we expected and even $25,000 is not unreasonable if you take Philippine ore out of the equation."
Senator Bam Aquino has filed a bill urging a halt to exports of unprocessed mineral ores, similar to a ban introduced by Indonesia that led to a sharp spike in nickel prices and cut exports of other ores.
The Philippines, which has vast but largely untapped mineral resources, has been looking at ways to raise the contribution of mining to its economy.
The bill, filed in late August, would require domestic processing of all minerals extracted in the country prior to export if passed into law.
This may require nickel miners, for example, to build more smelters to process the ore before shipment. Some ores are shipped directly to China and Japan for processing.
The Philippines currently has two processing plants for nickel, both owned by the country's top producer Nickel Asia Corp, two for gold, and one for copper, according to the Mines and Geosciences Bureau.