Nickel prices jumped to their highest point in more than a month overnight after mining company Vale slashed its annual output target for the stainless steel ingredient due to the impact of the coronavirus pandemic.

Benchmark nickel on the London Metal Exchange (LME) was 4 per cent higher at $US12,520 per tonne at 1600 GMT, after earlier jumping to its highest point since March 13 at $US12,535.

“Vale’s cut to production has supported the market but mines closing production is not too new as we knew some mines would shut,” said Commerzbank analyst Daniel Briesemann.

“The negative impact of the virus is more severe for the demand side and the market could be well oversupplied this year.”

Vale, one of the world’s top producers of nickel, cut its 2020 production forecast for the metal to 180,000-195,000 tonnes from 200,000-210,000, excluding its unit in New Caledonia, because of the impact of the novel coronavirus outbreak.

Japan’s Sumitomo Corporation has also shut down output at a nickel mine in Madagascar while major nickel producer the Philippines closed some of its mines to curb transmission of the virus.

Demand for nickel picked up slightly in March as China reopened its economy. Stainless steel futures surged as much as 4.4 per cent overnight.

Despite the mounting supply cuts, a Reuters poll showed that the nickel market is expected to be in surplus of 89,000 tonnes this year.

China, the world’s top metals consumer, cut its interest rate for a second time after its economy contracted for the first time in decades. The move – which was widely expected – is aimed at cushioning the world’s second largest economy against the impact of the coronavirus.

Global copper smelting slid in March, driven by shutdowns in China but started to recover at the end of the month, according to an index based on satellite surveillance of copper plants.

Aluminium stocks in LME-registered warehouses soared 46,275 tonnes, helping to lift inventories available to the market to 1.18 million tonnes which is the highest since December 20.

The discount of LME cash aluminium to the three-month contract was at $US37.75 a tonne, reflecting expectations for oversupply.

Earlier this month the spread was at a discount of about $US40, its deepest discount since July 2015.

LME aluminium prices fell 0.2 per cent to $US1,504 a tonne.

Vale also cut its 2020 output estimates for copper to 360,000-380,000 tonnes from 400,000 tonnes.

LME copper eased 0.6 per cent to $US5,179.50 a tonne, zinc fell 0.5 per cent to $US1,947.50, lead gained 0.8 per cent to $US1,688, while tin gained 1.1 per cent to $US15,230.

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