Dow Jones reported that nickel premiums in Singapore are rising amid stronger Chinese buying interest and tightening supply in the city state.

A Singapore based trader said that full plate cathode premiums are around USD 100 to USD 110 a tonne as compared with USD 75 a month ago, and one major market participant is offering metal as high as USD 120 per tonne. He added that "There has been a lot of nickel buying in Singapore."

Much of the recent interest in physical nickel has come from Chinese buyers, Singapore and London based traders said, with enquiries increasing since an arbitrage window between London Metal Exchange and Shanghai spot prices reopened. Nickel traded at CNY 159,000 per tonne in Shanghai, while the LME's three month contract was around USD 21,000 per tonne. Nickel opened at USD 20,990 per tonne on the LME.

A London based trader said that a second factor supporting nickel premiums in Singapore is a tightening nickel pig iron market in China, market participants said, after the cost of producing NPI increased recently amid power cuts in China. With costs rising, NPI sellers are holding out for higher nickel prices and are reluctant to sell their product at current LME levels.

The resultant tightness in the Chinese market has reignited interest in primary nickel in LME bonded warehouses in Singapore, where stocks have fallen to 7,482 tonnes from 7,968 tonnes since the start of August. Stocks in the South Korean terminal of Busan have also fallen this month on higher Chinese consumption, dropping to 4,278 tonnes from 4,752 tonnes on August 1st 2011.

(Sourced from www.dowjones.com)