Nickel in LME soared 5% to 11-year high due to severe supply shortage

LME nickel futures rose sharply to the highest level since 2011 on Wednesday, with supply shortages forcing traders to pay a huge premium to get the metal.

17:00 London time (01:00 Beijing time on January 20th) nickel for three-month delivery in), LME surged $1081, or 4.9%, to close at $23154 a tonne, having reached $23220 in intraday trading, the biggest one-day gain since October last year.

Nickel, used in stainless steel and electric car batteries, has risen about 11 per cent so far this year, after rising 25 per cent in 2021 and 18 per cent in 2020.

The LME spot / three-month spread surged this week to its highest level in more than a decade as exchange inventories fell, prompting LME to say it was watching the market closely. The spread fell on Wednesday.

LME said on Wednesday that it was monitoring fluctuations in nickel prices. The premium or reverse spread in alternate trading jumped to $90 a tonne on Tuesday, the highest since 2010, and about $2 a tonne on Wednesday.

"We are bullish on nickel," said Geordie Wilkes, an analyst at Sucden. "We may see some weakness in the short term, but from a fundamental point of view, there is nothing to worry about."

Inventories at LME-registered warehouses have fallen to 94830 tonnes from more than 260000 tonnes in April. Inventory in the warehouse of the Shanghai Futures Exchange is 4711 tons, close to an all-time low.

One analyst said the nickel market was experiencing a severe contraction.

The global nickel market is in short supply from January to November 2021, with apparent demand exceeding production by 135700 tons, according to a report released by the World Bureau of Metals Statistics ((WBMS)) on Wednesday. In 2020, the market had a surplus of 84000 tons.

For other metals, copper for three-month delivery closed up $165.5, or 1.71%, at $9841.50 a tonne on expectations that China, the number one consumer, could introduce further stimulus measures.

Liu Guoqiang, deputy governor of the people's Bank of China, said on Tuesday that as downward pressure persisted, the central bank would introduce more policy measures to stabilize the economy and stay ahead of the market curve. Liu Guoqiang said the central bank will expand the use of its policy tools to prevent the "collapse" of credit.

On Monday, the people's Bank of China unexpectedly cut borrowing costs for medium-term loans for the first time since April.

LME aluminum rose $26, or 0.86 per cent, to $3050.50 a tonne, having previously reached $3053, the highest level since Oct. 21. Aluminium prices have risen 8 per cent this year after rising 42 per cent in 2021.

Tin for three-month delivery in LME rose $604, or 1.43 per cent, to $42896 a tonne after hitting an all-time high of $43000 a tonne. After rising 92 per cent in 2021, prices have risen by about 10 per cent this year.