The Hindu Business Line : Dip in nickel inventory levels buoys price

Huge deficit
Data released by the International Nickel Study Group shows that the global nickel market has moved further into deficit in June.
The deficit expanded to 8,200 tonnes compared with a deficit of 1,700 tonnes in May.

Washington , Aug. 18

Nickel market is going places. Amidst evidence of strong fundamentals, nickel prices continue to register fresh all-time highs. Inventory levels at exchange have dwindled to almost nothing.

In London, after breaching $29,000 a tonne, nickel closed at a fresh all-time high of $29,100 a tonne, closing 6 per cent higher on Wednesday. Early trades on Thursday were slightly lower following LME announcement that it was imposing a $300 a tonne per day backwardation limit in the nickel market and suspending the Lending Guidance with respect to those with nickel positions weighing on prices.

On Friday, it ruled at $28,500.

Supplies down

The unprecedented step of allowing those with short positions falling prompt to roll their positions forward at a fixed penalty of $300 a tonne/day was in recognition of the extreme tightness that has developed in the availability of nearby nickel supplies for settlement of its contracts, an analyst commented.

Meanwhile, latest data released by International Nickel Study Group showed that the global nickel market moved further into deficit in June.

The deficit expanded to 8,200 tonnes compared with a deficit of 1,700 tonnes in May and of 2,100 tonnes in April.

Demand growth firm

Demand growth, on the other hand, continues to be strong rising by 9.3 per cent year-on-year in June.

This marks the fourth consecutive month of year-on-year increase in consumption. Critically, low level of LME inventories is seen as exacerbating the tightness in the nickel market. Stocks fell by 42 tonnes to register 6,120 tonnes on Thursday. It is reported that about 5,000 tonnes of the metal are already booked for outward shipment.

While LME action may have taken some heat out of the nickel market for the time being, fundamentals point to even higher prices to come. For those short on the LME, it cannot get any worse.