Nickel entered a bull market on speculation Russian supplies will be disrupted at a time when some shipments are already banned in Indonesia.

Last year’s worst performer among industrial metals trading on the London Metal Exchange is this year’s best, gaining 16 percent and on track for the first annual gain since 2010. Prices fell 24 percent in 2011 after touching $29,425 a metric ton in February that year, the highest since April 2008. Indonesia, the biggest producer of mined nickel, banned ore exports in January.

The U.S. and the European Union slapped sanctions on Russia after a disputed vote in Crimea paved the way for President Vladimir Putin to annex the region from Ukraine. Russia’s OAO GMK Norilsk Nickel is the world’s biggest producer of the metal used to make stainless steel. The price reached a record $51,800 in May 2007.

“Nickel has enjoyed the support from expectations that a potential supply deficit is building,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “Nickel suffered some of the biggest losses since the peak in 2011, and on that basis, many funds may view the upside potential as quite significant.”

The metal for delivery in three months closed at $16,190 a ton on the LME today, the highest since April 11. Prices rallied 22 percent from $13,285 a ton on Nov. 27, exceeding a 20 percent gain, the common definition of bull market.

Nickel Shortage

Nickel will be in shortage next year, at 35,000 tons, compared with a surplus of 68,000 tons this year, Barclays Plc said in a Feb. 12 report. Demand last exceeded output in 2010, according to the Lisbon-based International Nickel Study Group, representing consuming and producing countries. Last year’s surplus of 172,700 tons was the highest on record, the group said.

Indonesia banned exports of unprocessed ore on Jan. 12 to encourage more investment in smelters and refineries to process commodities into higher-value products. Indonesian ore accounts for about 14 percent of global output of refined metal.

Nickel prices that reached a record $51,800 in 2007 fell 19 percent in 2013, a third straight drop, as China expanded supply of nickel pig iron, a lower-grade substitute for refined metal used in making some types of stainless steel. After China developed the smelting technology to produce nickel pig iron profitably, output reached 480,000 tons last year, or 24 percent of the nickel market, compared with 180,000 tons in 2010, Goldman Sachs Group Inc. estimates.

Indonesia, Philippines, Australia and Russia are the biggest nickel-mining countries, according to the international study group. China, Russia, Japan and Australia produce the most refined metal.

“Nickel is currently getting the double support from Indonesia and also the risk of further sanctions against Russia and possible supply disruptions,” Hansen of Saxo Bank said.

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