Ann: 2018 Notice of Annual General Meeting, page-95

Hi MC,

I saw your Q before you self-modded. Not sure why you did that. They were good questions. Anyhoo, I thought I'd add this, as it relates to the perceived disconnect between LME inventories and the NP.

In my experience the int'l NP, as a reflection of the relationship between supply (LME inventories) and demand, can become quit disconnected for various periods of time. Ni has a history of doing this. For a relatively recent example we only need cast our minds back to the last boom, in which a similar upside disconnect emerged towards the end-phase of the Ni boom in which the NP and LME inventories both marched upwards in sync. A clear contradiction in the eyes of classic economic theory. Those poor economists who believe in Efficient Market Theory.

For me, it was a reflection of the very buoyant sentiment that permeated through most Ni market participants that demand would continue to outstrip supply. And so prices continued to rise -- even in the face of direct evidence (at that time) to the contrary (i.e. that supply was now quickly outstripping demand to create a massive supply glut). But price continued to rise... until it didn't. And only then... after all the bulls had exhausted themselves price then turned and the "laws" (very loose term) of classic economic theory finally reasserted themselves... and the NP began to fall... and fall... and fall, along with all the supply shuttering that eventually occurred.

Today, the market is much more circumspect. Not the same Nuclear Winter mindset that permeated in 2015-2016, but it's still more cautious, imo, as evidenced by the 25% correction that the USD int'l NP has experienced since the end of the 12-month up-leg that ended in June.

After a 12-month holiday from (say) Dec, 2016 to Dec, 2017, LME inventories have now decreased from their all-time peak of ~470kt in mid-2015 to ~220kt today. Global consumption of Ni end-products has increased, yet the NP is still 'faffing' around at modest levels. Inventories and price are now both moving downwards. What gives?

Well, imo, recent price got ahead of itself. There will come a time when the inventories will fall below a certain level, at which point we crazy humans (a herding species) will collectively wake up and realize that a shortage is now a distinct and very real possibility... and that's without factoring in the timing of the widely anticipated battery metals demand revolution. And at that point in time (imo) prices will rise... in earnest... with conviction... in a sustained manner. Personally, I think we will need to see LME inventories with a 1 in front. Say, ~150kt or less? Who knows what the trigger will be. But eventually, if inventories continue to deplete, there will come a time in the not-too-distant future in which the current downside disconnect will end and Ni prices will rise... and Classical Economists will be able to breathe again! (lol)

Don't you just love the vagaries of the human condition open markets?

Z

PS. The technicals suggest that this current sell-off might be getting close to ending. We'll see...

PPS. Yeah, I know about the reported shell game of LME inventories from SE Asian warehoused being shipped to non-LME European warehouses. For me, a worthwhile question to ask is why anyone would bother to spend the money required to ship those tonnes half way around the world only to re-house it into different warehouses. I think the EU battery crowd are stocking up and I think that's a good thing. It suggests that battery metals thesis is real and not just 'vapourware' -- assuming SB and his mates aren't actually attempting to corner the market (lol) .  Bottom line: LME inventories are still as good an indicator/proxy of global inventories as ever, imo.