Nickel prices rose to a three month high on Wednesday as investors worried that one of the world's largest producers, Brazilian miner Vale, could curtail supply in an already tight market.
Benchmark nickel on the London Metal Exchange (LME) did not trade in official rings but was bid up 1.5% at $12,300 a tonne.
The stainless steel ingredient hit more than two-year lows on 2 January as concerns over slowing economic growth in China cut demand expectations, but it has since rallied around 17% as supply deficits reduce exchange inventories.
Iron ore and nickel producer Vale on Wednesday said it would sacrifice production for safety after a tailings dam burst in Brazil last week, killing at least 84 people.
The news pushed Chinese iron ore futures to their highest in nearly 17 months and stirred the nickel market.
"There is a bit of concern that there could be some impact on Vale's nickel assets," Deutsche Bank analyst Nick Snowdon said. But it was unclear what, if any, effect there would be on Vale's nickel output, Snowdon said, adding he expected supply shortfalls both this year and in 2020 and nickel prices around current levels were justified. Vale produced 288,200 tonnes of nickel in 2017, around 14 percent of total global output, of which around 25,000 tonnes is mined in Brazil.
■ Nickel stocks: At 202,032 tonnes inventories of nickel in LME-registered warehouses are down from around 370,000 tonnes at the start of 2018 and near the lowest since 2013.
■ Spreads: Suggesting that availability of nearby metal is tightening, the discount of cash nickel compared to the three month contract has shrunk from around $95 a tonne in July to around $60.
■ Warrants: One entity holds between 50 and 79% of LME nickel warrants, increasing concerns over short supplies.
■ Trade talks: The United States and China launch a critical round of trade talks on Wednesday amid deep differences that will make it difficult to reach a deal before a 2 March US tariff hike.
■ Norilsk: Russia's Norilsk Nickel said on Wednesday its output of nickel from Russian raw material would increase in 2019 to 220,000-225,000 tonnes from 216,856 tonnes in 2018.
■ Copper: LME copper was bid up 0.7% in official rings at $6,095 a tonne after 12,500 tonnes of cancellations cut on-warrant stocks in LME-warehouses to 104,950 tonnes, reversing recent gains and pushing levels towards October's 13-year low of 56,650 tonnes.
■ Other metals: Aluminium traded down 0.2% at $1,890 a tonne, zinc traded 0.4% higher at $2,667.50, lead was bid up 0.3% at $2,081.50 and tin was bid flat at $20,675.