I have noticed that the cash and 3 month LME spread is gettig...

I have noticed that the cash and 3 month LME spread is gettig very tight

here is the article


Nickel regains composure as shorts still suffer

By MetalsInsider.com
Jun, 4th

LME nickel regained some of its composure last week after the big $4,100 slump of the previous week. It was no doubt helped by a similar process underway in the LME copper market but more pertinently by the fact that there remain shorts who are caught across the front part of the forward curve.

A Fresh Look
London locals last week were taking a fresh look at the previous week’s sell-off. Although there is little doubt that technical funds were off-loading positions as part of a broader restructuring movement across just about every LME metal, there was also the confirmation that a new producer had been hedging in the market.

UK junior Albidon revealed that it had hedged (sold) 9,020t of metal from 2009 to 2013 to protect fund flows from its new Munali project in Zambia.

The company’s statement said only that it had completed the programme without providing any other timeframe. However, the London “street” was quick to note that it may have generated the extra impetus to trigger fund selling the previous week, particularly given confirmatory moves along the forward curve.

It was also noted that there was little further selling impetus around last week, LME 3-month nickel comfortably holding support in the $46,000-46,500 area and closing Friday close to the highs at $47,500—a week-to-week gain of $1,200.

But Same-Old, Same-Old
Rising LME inventories—they were up by 59% in May with cancelled tonnage falling—have also started to gnaw away at nickel’s shiny bull credentials. However, there are suggestions that what has recently surged into Rotterdam may leave just as quickly. And it’s clear that what has come in is not enough to allow caught shorts to get out of the market.

Tom-next, the shortest-dated LME spread, was trading at a roaring $220-225 backwardation at one stage on Wednesday and although the full cash-to-3-months period eased over the course of the week, it still ended up valued at a huge and still highly-painful (for shorts) $2,590 backwardation.

As we have said before, it’s hard to see nickel prices collapsing any time soon until this acute tension on the market’s nearby dates is resolved. Rising LME inventories will help but everyone is keeping an eye on that Rotterdam tonnage to see if it stays or goes.

Not helping the bear cause is continued slippage on the supply side. Last week brought production forecast downgrades from both Canada’s LionOre and Australia’s Sally Malay. Labour unrest continues to simmer away at CVRD-Inco’s Voisey’s Bay mine in Canada with the company’s next hurdle the reaction of union workers elsewhere in Canada to concentrates shipments that have been made using replacement (the union calls them something else) workers.

CVRD also said one of its new nickel projects—Vermelho—may be subject to unspecified delay because of a potential power shortage in Brazil.

Most analysts seem to be looking for prices to weaken over the second part of this year—largely on the combination of slowing stainless steel production growth and increasing use of no- and low-nickel stainless grades. But it is not a consensus—there are still several big-name analysts looking for a further price spike above $50,000.

The London nickel market last week gave no clues as to which path it may follow in the next few weeks. The best signals will remain LME stocks and LME spreads.