The cash/three-month spread recently reached a $20 per tonne backwardation while the June/July LME spread recently moved out to a $39 per tonne backwardation, further indicating nearby tightness after a sustained period of contango.
The nickel market has not reached a clear consensus on the root cause of the tightness in the forward curve although it appears that a confluence of long- and short-term influencing market factors are squeezing nickel futures.
Macroeconomic tension from faltering US-China trade negotiations, set against a backdrop of Chinese economic weakness, for which nickel is considered a base metals proxy, has incited bearish selling.
“People are getting concerned about [the] June/July [spread] trading at a back[wardation] after a long period of contango,” one European trader told Fastmarkets.
The contraction in LME nickel spreads followed a downtrend in the LME three-month nickel price.
The LME nickel price has trended lower so far in the second quarter, falling by...