Bareksa.com - Nickel prices inched higher on Wednesday, on track to post their biggest monthly gain in 19 months, on tight supplies from Indonesia and fears of sanctions on top refined producer Russia.

Three month nickel on the London Metal Exchange (LME) rose 1 percent to $18,350 a tonne at 0927 GMT. It is up close to 15 percent this month, in the fifth consecutive month of gains. Prices are trading more than 30 percent higher in the year to date.

An Indonesian ban on exports of unprocessed ore from January tightened supplies of nickel ore which top buyer China uses to produce nickel pig iron for stainless steel. This could force mills to increase use of higher-grade refined metal.

"It is probably going to take some time before Indonesia is able to turn its ore into refined nickel to export," said Caroline Bain, senior commodities economist at Capital Economics.

"From the current price level I do feel it is overdone and we could see prices dropping back but I expect it to strengthen again going into next year as stocks would have been depleted by then."

Sanctions on Russia over its actions in Ukraine have fuelled concerns that exports of top refined producer Norilsk Nickel could be hit.

Norilsk and top Russian aluminium producer UC Rusal , however, are not among the 17 companies that the United States sanctioned this week.

There were some signs that nickel's rally may be cooling, given prices failed to react to a 5.2 percent drop in Norilsk's first-quarter production, broker Triland said.

"The fact that the nickel price is closing mostly unchanged on the day is probably a sign that the market is tired and still due a downward correction," it said in a note late on Tuesday.

LME copper rose 0.2 percent to $6,730 a tonne. Prices have recouped 1.3 percent this month, having hit $6,798, the highest since March 7, in the previous session.

A crackdown on credit in China has curbed the ability of traders and manufacturers to finance copper imports, squeezing domestic supply and this week and helping driving domestic premiums to the highest in almost three years.

Business was tailing off as traders squared up as Shanghai markets will be closed on Thursday and Friday for public holidays, while the LME will be shut on Monday.

Chilean miner Antofagasta saw its copper production shrink in the first quarter due to scheduled plant maintenance and falling ore grades but a weaker Chilean peso helped it keep costs under control.

Kazakh miner Kazakhmys posted a slight decrease in its first-quarter copper output, as it reduced extraction in high-cost areas as part of its strategy to switch to lower-cost mines. (Source : Reuters)