Spot nickel premiums crashed over the past week with the market engulfed in a selling frenzy as stock holders rushed to capitalise on high prices on the London Metal Exchange.
The three-month LME nickel contract hit a fresh high today at $16,275/t, the highest price since 16 December 2014. Three-month nickel prices have increased by $565/t or 3.6pc from $15,710/t on 22 August.
Prices have been rising since July when news emerged that Indonesia may bring forward its plans for a nickel ore export ban from the current date of 2022. Although this policy has not been confirmed, the speculation has prompted investors to buy nearby nickel supply on availability concerns.
The Argus weekly assessment for the full-plate nickel premium plunged week on week to $80-100/t in-warehouse Rotterdam today, down from $150-180/t on 22 August.
The 4x4 cut nickel cathode premium was assessed at $215-265/t in-warehouse Rotterdam, almost halved from $400-450/t in the previous week.
Cut cathode was offered as low as $100/t but this was not a widely traded level.
The nickel briquette premium also crashed to $20-50/t, down from $150-180/t.
"Lots of people are trying to get rid of some metal at these high prices; it's more important to make the business now before prices go down again," one trader said.
Some stock holders did not hedge their purchases made before the price rally when nickel prices were below $15,000/t and hence are keen to sell.
"When you have earned $1,000-2,000/t, nobody cares for $100/t premiums," the trader added.
Some material was even offered at a discount to LME nickel prices, the trader claimed.
The widening backwardation has also increased pressure on metal holders to liquidate existing stocks in order to avoid increased financing costs. But this dynamic varies according to the stock holders' positions.
"It totally depends on your position, if you are a producer, you will try to do all the sales now, it doesn't matter the premium. If you are short, you better get out of it otherwise you can't liquidate your position and you are forced to roll your position," said a second trader.
The LME nickel September-December backwardation widened to $100/t at 1805 BST today, more than doubled from $40/t on 22 August.
As a result, short position holders are keen to liquidate their stocks before September.
LME on-warrant stocks fell by 4,632t or 4pc over the week to 107,400t on 29 August, while cancellations increased by 5,490t or 14.5pc to 43,308t.
