Short position holders were reported to be eager to avoid the elevated holding costs associated with the persistent, wide backwardation in the London Metal Exchange cash/three-month nickel spread, which was around $101 per tonne on Tuesday, by delivering material back onto the Exchange.
Nickel premiums in the region were beginning to resemble the incentive cost of delivering material back into LME warehouses, with market participants asserting that this has become a viable option for short position holders.
It allows them to hedge a position by delivering metal against it, provided they have such metal, and borrowing back the spread at a contango on a daily basis, rather than selling material at a discount while spot demand is extremely thin.
Fastmarkets assessed the nickel uncut cathode premium, in-whs Rotterdam, at $50-80 per tonne on October 8, down from $80-100 per tonne a week ago. The corresponding nickel 4x4 cathode premium,...