Nickel is back!

[sptrawler]

London Metal Exchange to start trading nickel again, apparently measures have been put in place to control price swings, including reporting trades of more than 600T and where the material is sourced from and limits on daily price movements.
High quality known reserves should benefit IMO, it sounds as though there is way too many smoke and mirrors trades going on.

London Metal Exchange to resume nickel trade

LONDON (AP) — The London Metal Exchange plans to resume trading in nickel, a week after it was suspended when the price of the metal surged to over $100,000 a ton.

apnews.com

From the article:
LONDON (AP) — The London Metal Exchange plans to resume trading in nickel, a week after it was suspended when the price of the metal surged to over $100,000 a ton.

Trading will resume at 8 a.m. London time on Wednesday, the LME said in a statement, saying a major market client had confirmed it had gained support from banks that might forestall further “disorderly conditions.”

That followed an announcement Monday by Tsingshan Holding Group, a Chinese metals giant, that it had struck a deal with a consortium of its creditors on a “standstill arrangement.” It said the banks agreed not to make margin calls or close out their positions against Tsingshan while the company is resolving its nickel margin and settlement requirements.

“As an integral feature of the agreement, there is provision for the existing hedge positions to be reduced by the Tsingshan group in a fair and orderly manner as abnormal market conditions subside,” it said.

Before trading was suspended, nickel prices had quadrupled in a week amid widening and severe economic sanctions against Russia for its invasion of Ukraine.

The LME said it would specify precise levels for daily price fluctuations later Tuesday.

Prices for copper, zinc and aluminum have fallen this week along with the price of oil and other commodities.

 

[Tropico]

5% for Nickel, 15% for other base metals. I think they will review Ni daily.

https://www.lme.com/api/sitecore/MemberNoticesSearchApi/Download?id=ac564a6b-b70f-4ae9-9f0d-d9e5decdea6e

 

[rederob]

Nickel will be back in 2 hours hours from now!
Who is betting on firmness, and who thinks there's going to be a price collapse?
LME and SHFE warehouses barely have a day's worth available, so whatever happens today we still don't get any more metal to play with.

 

[sptrawler]

I think there will be a run on 99.8% grade1 nickel, now these contracts have to be transparent, long term contracts will be required to get price and supply certainty.
I would think it will be impossible to quickly change most production processes, or to change chemistries, it will be very interesting .

 

[Sean K]

I think there will be a run on 99.8% grade1 nickel, now these contracts have to be transparent, long term contracts will be required to get price and supply certainty.
I would think it will be impossible to quickly change most production processes, or to change chemistries, it will be very interesting .

I'm not sure how a nickel developer does a DFS at the moment. On $20K a ton, or $40K? It's a slightly different parameter on the economics of a project. CTM did their scoping study on 7.50/lb, it's now 21ish. They might have to plug in a range from 7.50 to 21, which is nuts.

 

[sptrawler]

I'm not sure how a nickel developer does a DFS at the moment. On $20K a ton, or $40K? It's a slightly different parameter on the economics of a project. CTM did their scoping study on 7.50/lb, it's now 21ish. They might have to plug in a range from 7.50 to 21, which is nuts.

Very true, but I think it is more a concern for the Li ion battery producers, they need some certainty on the price of a major part of their process, imagine if you produce batteries and lock in contracts at a certain price to supply them, then one of your core materials eg lithium, nickel, manganese, graphite goes through the roof.
Some devices need the energy density of lithium ion batteries, as they are high current draw, even as we have said with E.V's at the moment the long range vehicles and definitely heavy vehicles will still need the more expensive materials.
The other thing is, I wouldn't think if you have a factory that rolls up Li ion batteries, you can just say to the production team, tomorrow we are changing to Li fe po batteries.
So I think the only option, will be to lock in a contract with a reliable producer, like I said I think BHP's nickel west will be getting a lot of knocks on the door.
Lets be honest, the shenanigans going on with major share holders shorting and not covering, makes you wonder how reliable they would be to source your material from IMO.

 

[wayneL]

Absolute coin toss with no skin in the game here.... Politics and whale ass covering... Gap lower and angry longs.

 

[Sean K]

So, Nickel down to $25K by 5% increments per day perhaps...

 

[sptrawler]

There is a reason, Elon Musk last year was running around locking in contracts, for nickel IMO.

 

[Country Lad]

LONDON -- Nickel trading in London was suspended Wednesday shortly after it resumed following a weeklong halt as the exchange investigated a glitch.

The London Metal Exchange said it had to pause trading to investigate a “system error” that let the price fall below a lower daily limit.

The exchange brought in daily price limits to reduce volatility as part of efforts to restart trading for the nickel contract, which was first suspended last week when the price skyrocketed to over $100,000 per ton.

The exchange said it “allowed a small number of trades” to be carried out below the lower price limit. It vowed to reopen trading “as soon as possible.”

 

[Padowan]

Very true, but I think it is more a concern for the Li ion battery producers, they need some certainty on the price of a major part of their process, imagine if you produce batteries and lock in contracts at a certain price to supply them, then one of your core materials eg lithium, nickel, manganese, graphite goes through the roof.
Some devices need the energy density of lithium ion batteries, as they are high current draw, even as we have said with E.V's at the moment the long range vehicles and definitely heavy vehicles will still need the more expensive materials.
The other thing is, I wouldn't think if you have a factory that rolls up Li ion batteries, you can just say to the production team, tomorrow we are changing to Li fe po batteries.
So I think the only option, will be to lock in a contract with a reliable producer, like I said I think BHP's nickel west will be getting a lot of knocks on the door.
Lets be honest, the shenanigans going on with major share holders shorting and not covering, makes you wonder how reliable they would be to source your material from IMO.

@sptrawler agree that medium to longer term the LME debacle potentially damaging for the use of nickel as a key ingredient EV batteries, all European car manufacturers would be not liking the thought that a Chinese billionaire that likes to make big bets can massively influence the cost of one of their key raw commodity inputs, more longer term investment in LFP batteries as you say could ease the squeeze

 

[sptrawler]

@sptrawler agree that medium to longer term the LME debacle potentially damaging for the use of nickel as a key ingredient EV batteries, all European car manufacturers would be not liking the thought that a Chinese billionaire that likes to make big bets can massively influence the cost of one of their key raw commodity inputs, more longer term investment in LFP batteries as you say could ease the squeeze

I would think so, but the grade1 nickel will be reserved for high spec batteries IMO.
A lot more transparency in the trading of some materials will be the result IMO
Already LFP blade batteries are getting a lot better, but that will in turn cause advancement in LNCM batteries, things don't improve untill they have to.

 

[rederob]

Maybe not too many trades overnight, as noted from a post above.
Nevertheless, the closing price dipped only 43 cents/lb, so bullish sentiment has barely waned for nickel:

 

[rederob]

This Bloomberg article details the present issues with nickel's pricing on the LME.
It's a long an interesting read. Here's a snippet:

The nickel market, as I hope I have conveyed, is weird. But at a high level it is not that weird. Nickel was bopping along at some normal price. Nickel producers and users and traders and speculators were trading nickel futures to hedge their price risk or to bet on price moves. They all had to post margin to secure their obligations under the futures contracts, and as prices moved one side had to post more margin (and the other got some margin back). The traders and their brokers and the exchange all had models about how much prices typically moved, and those models affected their risk management decisions: how much margin to demand, how many futures to sell to a client, how much cash to have on hand to meet margin calls, etc.​

​

And then a big surprising geopolitical event — Russia’s invasion of Ukraine — pushed up the price of nickel more and faster than people expected. Traders were not ready for it; they did not have the cash on hand to meet margin calls, so they were forced to buy back contracts and the price went up in a vicious cycle that left the price of nickel futures “disconnected from physical reality.” ​

​

The question arising from LME's nickel pricing rules, as noted in the article, is when will traders etc. decide they must have metal for delivery and therefore have no other option and buy back into the market. And, does that then become the so called "real price" or has Russia's move and subsequent sanctions thrown a curve ball that will continue to have everyone bamboozled?

 

[sptrawler]

I would be surprised if there isn't a scramble, to lock in long term supply contracts, at a negotiated price.

 

[rederob]

Reality finally bites and nickel takes a few steps down:

Very little traded, and no inventory builds have occurred, so the march upwards should resume soon enough.
Even if it does not, the boom in lithium ternary battery manufacturing that will continue to at least 2024 should ensure that any future trips to the downside will be quickly reined in.

 

[rederob]

Nickel now practising the 2 step:

This is going to be fun.
Usually took months to see these movements which are occuring within a day.

 

[rederob]

This is going to be fun.
Usually took months to see these movements which are occuring within a day.

Déjà vu all over again ...

Looks like its close to LME's limit up, so should flatline from here.
Monday will give another clue to IGO's Western Areas bid still being regarded as fair by the independent expert. Given the present price is close to double that of a year ago IGO's bid looks more like highway robbery.

 

[divs4ever]

maybe IGO should offer a scrip component ( instead of extra cash )

that would be the deal more acceptable to me

 

[rederob]

maybe IGO should offer a scrip component ( instead of extra cash )

that would be the deal more acceptable to me

The problem for we small investors is that it's the major shareholders who get a disproportionate, ie undemocratic, vote which is effectively based on wealth. For example, as nice as Twiggy is (via Wyloo), he has at least a million times more voting power as an individual than I have. Combine that with a select few institutional decision makers, who are likely already heavily invested in IGO and therefore will be bigger winners again, then it's easy to see how when the takeover matter comes to a vote, then we are little more than nuisance value.

We are almost a full month since nickel prices went ballistic and the present price is about $12k/tonne higher:

While nickel prices are unlikely to remain as elevated as present (ie above $37k) over the longer term, it is somewhat farcical for IGO to present their takeover price as representative of a long term value proposition, and therefore they would not make a higher bid. All WSA investors knew that its project pipeline was still years away from maturing and that the transition to a greener future would continue to increase nickel demand, thus leading to much higher and more sustainable long run prices. How did the so called independent expert not work this out?

Right now there are two important questions:

1. how much longer before price volatility dissipates and we reach a steady state, and
2. what will the average price be when that happens?

I personally see $25k/tonne as where "support" should sit in the longer term, and until the Ukranian fiasco is sorted out I won't be surprised to see a plus $30k price ticker hanging out its window of opportunity. In IGO's takeover context a fairer price for WSA is well over $5/share.