LONDON, May 20 (Reuters) – The London Metal Exchange (LME) nickel market was last week gripped by the most acute tightness in a decade. Time-spreads flexed into backwardation as a long-running downtrend in exchange stocks squeezed short position holders.
Falling inventory and tighter spreads are normally strong bull signals in a commodity market. And in nickel’s case they seem to tally nicely with the International Nickel Study Group’s (INSG) forecast that supply will fall short of usage for the fourth successive year in 2019.
However, conspicuous by its absence is any strength in the outright nickel price, which has fallen from a March high of $13,765 per tonne to a current $11,910.
Nickel has been caught up in the broader base metals negativity caused by slowing global manufacturing activity and U.S.-China trade tensions. Chinese players also appear to have stopped buying nickel as a derivative of the rampant iron ore price.
But nickel’s own dynamics are also looking increasingly muted as analysts worry about a coming soft patch in demand even as production surges. Falling stocks, tightening spreads and a sliding price herald a period of confusing signals in the London market.
For the rest of this column: https://af.reuters.com/article/metalsNews/idAFL5N22W24I