The nickel price is on a tear supported by environmental production cuts across top producer China, plunging inventories and strong steel prices.

The most-traded nickel contract on the Shanghai Futures Exchange is set for a weekly gain of 5.6%, while open-interest – a measure of market participation – sits near record levels. On the London Metal Exchange, the price jumped to $15,340 a tonne on Friday, its highest close since January 2015.

The immediate driver for the surge in the price – up 75% over the past 12 months – is a sharp fall in stocks of the metal, mainly used to make stainless steel. Global stainless steel output grew 6% last year.

Nickel price soars as battery makers stock up on high grade metal

Nickel stocks in ShFE warehouses have dropped 39% over the past four months while inventories controlled by the LME have declined for 18 consecutive days. Total exchange stocks have dropped to below 300,000 tonnes, from more than 450,000 tonnes a year ago.

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