Nickel: Inventory, Prices Point to a Self-Supporting Market

According to the UK’s World Bureau of Metal Statistics, the nickel market was in surplus from January to December 2012 with production exceeding apparent demand by 137,000 tons.

Compare that to the whole of 2011 when the calculated surplus was only 1,200 tons.

Reported stocks held in the LME at the end of December were 51,000 tons higher than at the end of the previous year and had risen to 162,000 tons by March of this year, a level not seen for two years, according to a Resource Investing News article.

Yet the price has held relatively steady between a trading range of $16,000 to $18,000 per ton for the last few months, with the most marked move a sell-off which hit all metals in response to the Cypriot banking crisis.

nickel price
Source: LME

today's metal prices - MetalMiner IndXThe floor to the price likely results from the increasing appetite the financial community has for nickel as a stock and forward-sell play. The article quotes Jim Lennon of Macqurie Bank, who says, “the surplus (nickel) is being hoovered up by the financial community.”

Some 30 percent of the nickel held in inventory is said to be the subject of such financing deals – not quite as bad as aluminum, which is probably more like 80% – but a worrying trend which will continue, as with aluminum, to distort the market for consumers.

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