Column: Shanghai squeeze revitalises flagging nickel market – by Andy Home (Reuters – September 9, 2021)

LONDON (Reuters) – Nickel is making a comeback. London Metal Exchange (LME) three-month nickel hit a seven-year high of $20,225 per tonne on Thursday morning and has a new-found spring in its step after collapsing in February.

That is when Chinese steel group Tsingshan announced its Indonesian nickel operations would supply matte – a form of the metal used only for stainless steel production – to battery makers. That undercut a collective bet that only refined nickel would be sufficiently high grade for the electric vehicle sector.

Bull spirits were rudely doused and nickel was the under-performer of the LME base metal pack until June, but has now clawed back all of its losses and a little bit more.

LME time-spreads have shifted to backwardation and registered inventory is flying out the warehouse door. The metal is almost certainly heading to China, where a short squeeze is playing out on the Shanghai Futures Exchange (ShFE).

China is also looking physically short of nickel, with imports booming across the product spectrum. A market that has been obsessed by supply has been caught out by the strength of demand.

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