Nickel Market Update (March 27, 2013)

Nickel prices have improved slightly in the past month: according to data from Metal-Pages, nickel for three-month delivery is now trading around $17,010 per metric ton (MT) on the London Metal Exchange (LME), up from $16,805.

On March 25, prices of nickel and other base metals slipped somewhat on waning investor enthusiasm about the 10-billion-euro bailout of Cyprus. The move helped lower the chances of that country’s exit from the Eurozone, but involves a tax on bank deposits, which had been seen as insulated from the continent’s economic woes. Investors are also concerned that recent moves to curb inflation in China will lower demand.

Meanwhile, LME nickel stockpiles have risen to 162,024 MT, a level not seen since March 2010. However, financing deals involving nickel may be tying up about 30 percent of inventories, according to a Societe Generale (EPA:GLE) estimate quoted in a March 15 Bloomberg article.

“The surplus is being hoovered up by the financial community,” Macquarie analyst Jim Lennon told Bloomberg. “Financing of nickel is placing a little bit of a floor for nickel prices. There seems to be now a little bit of equilibrium developing around the $16,000 to $17,000 range, simply because material is being siphoned off by the financial community.”

In addition, cancelled warrants, or orders to remove nickel from LME warehouses, hit 32,226 MT on March 15, the highest level since at least 1997, though they have pulled back somewhat, to 26,502 MT, according to FastMarkets.