The three-month price rocketed to $15,875 per tonne in early afternoon trading on Wednesday April 18 – rising over 10% from Tuesday’s LMEselect close, nickel’s largest one-day move since 2009.
“We put it down to a deep market fear of further sanctions, the market is in uncharted territory and within a blink of an eye the price was up 10%. It is all market hysteria,” an analyst said.
On April 6, the US Treasury Department announced sanctions on Russian tycoon Oleg Deripaska's assets, including UC Rusal. This has in turn led to concerns in the nickel market due to Deripaska's Rusal holding a 27.8% stake in Norilsk.
Fellow Russian Vladimir Potanin is the largest stakeholder of Norilsk with 33% stake, but Potanin is currently unaffected by this level of sanctions which were announced on April 6.
“Nickel surged while fresh demand for the metal is arising as traders and consumers stock up ahead of potential sanctions against Norilsk,” John Meyer of SP Angel said.
“There is panic, panic, panic which caused problems and pushed the price up above $15,800 per tonne. It was a complete buying frenzy for a few hours and technical levels got smashed out of the water,” a market source added.
The metal has traded so far in an intra-day range of $1,670 while LME volume rocketed above 21,000 lots. This is the highest volume traded on the LME for nickel since November 2016.
Alongside the volume, there is an increased number of put and call options placed on strikes above $15,000 per tonne earlier today.
“Nickel where upside calls with strikes prices up $15,000 and beyond were the favorites it would seem,” Malcolm Freeman, Kingdom Futures, said.
“Looking at the 2-5% moves in the underlying market, it would seem that the penny has dropped in some quarters that the maximum you can lose buying an option is the premium and that it lets you ride out the storm of short-term volatility and lets you stay with the market,” he added.
Delisting of old Norilsk brands
Other market participants believe that some of the market may have misinterpreted the de-listing of old Norilsk brands on April 16, which in turn helped to fuel the rally.
“Talking to some parts of the market is seems there has been some misinterpretation of the delisting of Norilsk brands. But this decision was made in October, it was nothing to do with Rusal,” ING analyst Oliver Nugent said.
“There is quite rightly hysteria in the market surrounding sanctions and worries – but that has led to some confusion,” he added.
The LME sent a notice out to members in October 2017 stating it would be delisting Norilsk combine H-1 and Norilsk H-1Y nickel brands within six months.
“This delisting has been factored in – it cannot be the root cause of what we have seen, there has been a huge jump. The whole market is not going to misinterpret something. People’s worries about sanctions are fresh and real,” a trader said.