Nickel supply squeezes; prices go north of $ 22,000 a tonne

Nickel’s biggest supply squeeze in more than a decade is drawing attention from the London Metal Exchange, as plunging inventories mean buyers are forced to pay massive premiums for immediately available metal.

Cash contracts on the LME reached a $90-a-tonne premium to those expiring a day later, the highest since 2010 and nearing levels seen in 2007 during a historic squeeze. The bourse has stepped up its monitoring of the nickel market in response, and may take further measures to ensure orderly trading if needed. 

The turmoil in nickel is the latest example of acute supply stress in global metals markets, and represents the third time in 12 months that the LME has stepped in to increase monitoring. Both copper and tin have seen wild price moves in recent months after exchange stockpiles shrank dramatically, sparked by surging demand and supply bottlenecks during the pandemic.

For copper, the LME was forced to take rare steps to restore order, including placing limits on the nearest-term spreads for the metal and allowing holders of some short positions to avoid delivery.

Stockpiles have also fallen on the Shanghai Futures Exchange, leaving buyers exposed to a simultaneous squeeze in onshore and international markets, and helping to keep prices near the highest since 2011.

Nickel for delivery in three months on the LME was little changed at $22,075 a tonne in London, after earlier rallying toward a peak set last week. 

In other metals, tin jumped as much as 2.3% reaching a record-high amid a chronic shortage that’s been exacerbated by global logistics snarl-ups. All metals traded in backwardation on the LME, in a rare bout of synchronized tightness. Metals could find support after economists forecast that China’s cut of two key policy interest rates has opened the door to more monetary easing actions ahead. The country’s economy is being tested by outbreaks of the omicron virus strain, a decelerating property sector and sluggish consumer sentiment.

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