The Shutdown Of A Mine In The Middle Of The Pacific Just Caused Nickel Prices To Surge

A mining accident in New Caledonia, an archipelago 750 miles east of Australia, is causing nickel prices to surge to two-year highs.

Mining giant Vale was forced to shut down its Goro facility after "acid-containing solution" leaked into a nearby creek, Bloomberg reported. A Vale spokesman said the water quality in the creek was back to normal and that production would resume "shortly," though no date was given.

Futures climbed 4.1% percent to settle at $19,405 on the London Metal Exchange.

In a note, TD Securities' Bart Melek said he does not expect the current surge to last too long, as prices had already been pushed up by Ukraine, as well as a raw ore export ban in Indonesia, which he expects to be lifted in the coming months - though expects an uptick in 2015:

The fact of the matter is that even though global mined supply will drop by some 21%, actual smelted metal output should not drop by much more than 3% in 2014. And, given the somewhat lackluster, albeit improving demand growth, the global market will still post a 70k tonnes surplus this year, which will add to the some 361k tonnes of accumulated inventories from 2011 to 2013. The deficit of some 104k tonnes will only materialize in 2015. But for now there is some 150 day's supply in above-ground stocks, which is materially above what is required.

Here's the chart: