Commentary: Flash LME nickel squeeze may be a taste of things to come – by Andy Home (Reuters U.K. – January 16, 2019)

LONDON (Reuters) – Nickel bears have been sent running for cover by this week’s ferocious squeeze on the London Metal Exchange (LME). Short-dated time-spreads have flexed out to levels not seen in many years as a long-running decline in LME nickel stocks translates into cash-date tightness.

The resulting bear rout has halted a six-month downtrend in the outright nickel price. Bulls, however, should not get overly excited. There is as yet scant evidence this was anything other than a flash squeeze rather than a signal for higher prices.

But that is not to say there won’t be more such spread tension in the nickel market going forward. That nickel should be squeezed this week is no accident. Today is the LME’s “third-Wednesday” prime prompt date, the monthly clear-out of outstanding positions.

And there were a lot of short positions to be covered. LME broker Marex Spectron estimates that funds were net short of nickel to the tune of almost 20 percent of open interest coming into January.

Speculators were surfing a downtrend that saw LME three-month nickel slide from $15,845 per tonne in June last year to an early-January low of $10,525. All that time, however, LME stocks were falling. Registered inventory slumped by 44 percent, or 160,212 tonnes, over the course of 2018 and last Friday the headline figure fell through the 200,000-tonne level for the first time since 2013.

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