Nickel prices hit a five-year low this week as falling inventories and robust stainless steel demand drove the market beyond $10,000 (€10,132) a tonne. Since the beginning of the year prices have risen by about a fifth, or more than $1,600, on rampant stainless steel production, delays in output from new Australian mines, lower Russian exports and speculative buying. Stainless steel accounts for about 65 per cent of nickel consumption, and demand linked to economic growth is booming.

Supply tightness may be exacerbated in May and August, when labour contracts expire at two of the world's biggest producers in Canada, according to analysts. "One potential flashpoint for nickel during the first half of 2000 is the potential for labour disruptions at Inco and Falconbridge's Sudbury operations, which together account for over 15 per cent of total world supply," broker Macquarie Equities said in its weekly report. Traders said further gains were in prospect if the $10,000 level was conclusively cleared.