Nickel prices dropped on inventory increase

SHANGHAI, Nov 5 (SMM) – Shanghai nickel prices declined in morning trade, extending overnight losses as investors loaded up short positions after prices in London dropped on a rebound in inventories.

The nickel contract on the Shanghai Futures Exchange for December delivery shed more than 2% to a more than one-week low of 130,590 yuan/mt in the morning, while the three-month contract on the London Metal Exchange slipped to a low of $16,180/mt after a 2.7% decline on Monday.

Nickel stocks across LME-approved warehouses gained 2,874 mt on Monday to 69,180 mt, according to data from the bourse.

Inventories have been the focal point for the nickel market, as investors have digested the news of Indonesia’s temporary nickel ore export suspension amid an investigation into violations of export rules.

Over 40 vessels carrying nickel ore have been deterred from leaving Indonesian ports since the investigation started in late October, which even led to lower sea freight charges.

The metal used in stainless steel is already up more than 50% this year, on supply fears after the top nickel ore producer Indonesia said in September that it would bring forward the ban on nickel ore exports by two years to January 2020.

Sharply lower inventories also fuelled the concerns about supply and helped bolster prices. Since mid-September, about half of all the nickel in LME warehouses has been withdrawn, with stocks standing at a record low of 66,306 mt as of November 1.

Monday’s gain in inventories, coupled with the news that the LME is mulling improving its warehousing policy, fuelled morale among shorts and weighed on prices.