ickel surged to US$20,900 a tonne on the London Metals Exchange, a price not seen in 27 months.

The reason? Supply concerns: a ban on unprocessed ores by Indonesia entered its fifth month. Add to that Vale SA, the second-largest nickel producer, halted operations at its New Caledonia plant last week after an acid spill.

On the demand side, remarks yesterday by government officials in China seemed to indicate some loosening of regulations in financial markets, which could boost demand for commodities.

It would be a brave person that bet against further gains in the nickel price. Indonesia has forecast that nine nickel-processing plants may be completed this year.

The plants comprise two ferronickel and seven nickel-pig-iron smelters, according to data from the Energy and Minerals Ministry.

However, this timeline is seen as fanciful given that for a greenfield nickel smelter to be economical, capacity must be at least 10,000 or 15,000 tonnes of contained nickel per year.

Such a smelter would require several hundred megawatts of electricity capacity and more than $1 billion in capital investment.

The metal used in stainless steel is the biggest gainer this year among the six main metals traded on the London Metal Exchange.