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."
Copper rebounded from two-week lows and other metals also rose after the European Central Bank cut interest rates to new record lows to support the stagnating euro zone economy.
More accommodative monetary policy could free up liquidity for industry and investors, supporting metals prices.
ECB President Mario Draghi said if inflation looked like staying too low for too long, the ECB Governing Council was unanimous in its commitment to using other "unconventional instruments" - a phrase taken as code for printing money as the U.S. Federal Reserve and Bank of England have.
LME copper closed 0.4 percent higher at $6,930 a tonne after falling 1 percent in the previous session when it reached a two-week low of $6,882 a tonne.
Dimming copper's price prospects, however, were mine supply bottlenecks being cleared and beginning to feed into the market.
Newmont Mining Corp signed a deal with Indonesia that will allow for the resumption of copper concentrate exports next week, the head of the firm's local unit said, ending an eight-month tax dispute.
Aluminium closed 1.3 percent higher at $2,105 per tonne, zinc ended 1.4 percent higher at $2,398 per tonne, lead closed 0.8 percent higher at $2,225 per tonne and tin closed 0.7 percent higher at $21,500 per tonne.