Column: Shanghai nickel surge morphs into London squeeze – by Andy Home (Reuters U.K. – September 19, 2019)

https://uk.reuters.com/

LONDON (Reuters) – There’s only so much bullish news even the red-hot nickel market can absorb. London nickel leapt to a five-year high of $18,850 per tonne this month as Indonesia confirmed it would bring forward to next year a ban on exporting nickel ore.

That will cut off the major source of feed for China’s nickel pig iron (NPI) producers. This week’s news that the Philippines will suspend indefinitely operations in the nickel mining hub of Tawi-Tawi province threatens supply from China’s second largest ore supplier.

But rather than extending its super-charged rally, nickel has retreated from the highs in both London and Shanghai, a telling sign of bull exhaustion. This particular chapter in the nickel story, nevertheless, is far from over, the original Shanghai surge morphing into a London squeeze.

Shanghai has led London on the move higher, particularly during the ferocious rallies of Aug. 8 and 30, when much of the price action played out in the early hours of the London morning. The Shanghai Futures Exchange (ShFE) nickel contract saw both volumes and market open interest soar on the moves higher as speculators stampeded into the market.

That surge seems to be abating. Volumes remain elevated but market open interest has collapsed by almost 30% since the start of September, implying a wave of profit-taking. London too seems to have run out of upside momentum, with nickel sliding to $17,300.

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