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By Claudia Carpenter

Jan. 28 (Bloomberg) -- Nickel rose in London on speculation more production cuts will help erode a global surplus of the metal used in stainless steel. Copper and aluminum also rebounded from yesterday’s declines.

Cia. Vale do Rio Doce, the world’s second-largest nickel refiner, has stopped shipping nickel concentrate from Voisey’s Bay in Canada until it agrees with the local government on plans to build a processing plant. BHP Billiton Ltd. is closing its $2.2 billion Ravensthorpe nickel mine in Australia and part of the Yabulu processing plant.

“There’s speculation Yabulu might close as well,” said Robin Bhar, an analyst at Credit Agricole SA’s Calyon investment- banking unit in London. “It’s a high-cost facility.”

Nickel for delivery in three months gained $600, or 5.3 percent, to $12,000 a metric ton at 3:40 p.m. on the London Metal Exchange. The metal has eroded gains of up to 13 percent this year as inventories in warehouses monitored by the LME climbed to the highest since July 1995.

Yabulu can produce 75,000 tons of refined nickel and gets most of its supplies from Ravensthorpe, Bhar estimated. BHP declined to comment in an e-mailed statement from London-based spokesman Illtud Harri.

All LME metals advanced, in line with gains in equities in Europe, Asia and the Americas stemming from speculation that U.S. efforts to support the banking system may spur investor demand. Metals also climbed as the dollar fell against the euro, making commodities cheaper for buyers in Europe.

Lead Shines

The UBS Bloomberg CMCI Index of 26 commodities has dropped 2.5 percent this year as the dollar has added 5.6 percent against the euro. Lead is the best performer in the benchmark this year, rising 15 percent. The three-month contract gained $30 to $1,175 a ton today on the LME.

Production of nickel will exceed demand through at least 2011, Bhar estimated in a report this week. Stainless-steel production, which generates 65 percent of nickel consumption, will rise between 2 percent and 3 percent this year after falling 5 percent last year and 0.3 percent in 2007, Calyon said.

Aluminum and zinc are the only metals on the LME trading below their averages from 1980 to 2008, Calyon estimates show. Aluminum’s average is $1,617 a ton, and zinc’s is $1,212 a ton. The three-month aluminum contract rose $64, or 4.8 percent, to $1,404 a ton today, and zinc advanced $25, or 2.2 percent, to $1,170 a ton. Aluminum fell 3.1 percent yesterday.

Japanese shipments of aluminum rolled products dropped 22 percent in December, the most since April 1981, the Japan Aluminium Association said today. Prices have slid 11 percent this year as inventories in LME-monitored warehouses jumped to more than 2.7 million tons, the highest since the contract was introduced in 1978. Inventories may rise to as much as 3.5 million tons by the second quarter, Bhar said.

Copper jumped $120, or 3.6 percent, to $3,430 a ton after falling $245 yesterday. Tin rose $50 to $11,550 a ton.

To contact the reporter on this story: Claudia Carpenter in London at [email protected]

Last Updated: January 28, 2009 10:49 EST