July 18 (LTIT) –Shanghai nickel continued its giddy rally on Thursday morning trade, as buying from industrial consumers added fuel.

The most active October contract on the Shanghai Futures Exchange extended overnight gains, climbing more than 5% to fresh one-year highs.

SMM learned that major stainless steel mills made large purchases in the physical market earlier this week, improving overall spot trading activities, which had been anemic. This bolstered market sentiment, and lend some support to prices of futures.

Russian nickel was quoted in a smaller discount of 300 yuan/mt against the SHFE August contract on Wednesday, compared to 500 yuan/mt on Tuesday.

The nickel rally, meanwhile, gave a boost to prices of stainless steel. Stainless steel producers and traders continued to hike their quotes, with those for 304-series growing 400 yuan/mt from the previous week as of July 17.

Concerns about supply has been the main driver of recent gains in nickel prices. Indonesia earthquakes, its potential 2022 export ban on nickel ore as well as mining audit in the Philippines all sparked fears of a potential supply shortage.

The World Bureau of Metal Statistics (WBMS) reported on Wednesday that the world nickel market was in a deficit of 57,300 mt in the first five months of the year. The followed a supply gap of 91,300 mt for the whole 2018.