nickel price

Heres an article from miningnews
Tuesday, May 03, 2005

A FUNNY thing happened on the metal market late last week. Nickel for immediate delivery was $US750 a tonne more expensive than nickel for delivery in three months time.

So what, say most casual observers of the metal market. Does it really matter if something costs more now than in the future?

Ahh, says Dryblower, anyone who thinks like that is missing the point. In fact they're missing a number of points.

For starters, in normal market conditions the future price is expected to be higher than the current price – as it is right now for aluminium and zinc.

In unusual times, such as now, the market goes into what insiders call backwardation, such as the nickel situation where a tonne of metal today will cost around $US16,600, but if you ask for delivery in three months it will cost around $US15,850.

The gap of $US750/t is the widest since 1989 and a sign that strange things are happening in the nickel market.

One theory is that metal supplies are incredibly tight right now, which does not seem to be the case. Another is that someone is squeezing the market to make it appear tight, and to push the price up for short-term gain.

Believers in the conspiracy theory are pointing their fingers at the usual suspect in the case of nickel, the big Russian producer, Norilsk, and its annual trouble in getting supplies out of Siberia because of the spring thaw which chokes rivers and ports with logs and lumps of ice.

For anyone unfamiliar with Norilsk, the city, it is one of the most remote parts of the planet. Communications are primitive in the extreme, with shipping across the Arctic Sea the only route in (or out) for heavy loads.

If it is Norilsk playing silly games with the nickel market it will not be such a surprise, but it will represent a change of tune from the Russians.

As far as Dryblower can remember the last time the Russians played serious metal supply games it was in palladium, and the result was a totally ruined market with customers switching to more reliable supplies of platinum which is a substitute in auto exhaust systems.

Nickel is a different metal to platinum, but it does have substitutes, such as manganese, in certain grades of stainless steel, and when people start playing games on the market customers get nervous.

In his search for an explanation of last week's events on the LME Dryblower arrived at this conclusion – the market is in a state of flux. The boom days are over, but it is certainly not a bust.

Supply is rising, and seriously depleted warehouse stockpiles are creeping up – just.

It is this switch from shrivelling stockpiles to static stockpiles, and the potential for a modest rise in stocks as demand and supply move into equilibrium which is causing most of the confusion in the market.

In simple terms, the market is in the process of "normalising", and nickel consumers, and speculators are adjusting their books – with the overriding factor being that no-one is yet sure as to which way the price will go, hence a rather large backwardation, aided by Norilsk's traditional spring thaw issues, and perhaps a bit of Russian game playing to draw out any surplus metal which may be sitting in a back room somewhere.

Whatever the cause, it is significant that the current situation has opened the biggest gap in the market in 16 years. Watching what happens next will be seriously interesting.