LIVE FUTURES REPORT 23/10: LME nickel falls 1% despite drawdowns; C/3M contango persists

The London Metal Exchange three-month nickel price was trading down 1% at around $16,330 per tonne during the morning session on Thursday October 23, with persistent drawdowns failing to give support to nickel futures.

4,134 tonnes of material were taken out of LME-approved global sheds as of 9am this morning versus just 696 tonnes of metal delivered in, leaving LME global nickel inventory at 83,694 tonnes.

Just 84 tonnes of material were freshly-canceled at the same time, with on-warrant stocks now amounting to 29,910 per tonne.

Controversy continues to surround the nature of these drawdowns, with the London Metal Exchange having contacted all members to ask for clarification on client activity in the nickel market amid mounting concern over ever-tightening stocks and doubts that they are being drawn down to cover physical requirements.

“This is no surprise because, at the current rate of cancellations, were they to continue, there would be almost no stock left by the end of this week,” Kingdom Futures CEO Malcolm Freeman said in a morning note.

Nonetheless, nearby LME nickel spreads remain in contango, with the benchmark cash/three-month spread trading in a $15 per tonne contango today, slightly narrower than $20 per tonne yesterday but significantly wider than the $180 per tonne backwardation of October 21.

“If the LME request to members shows that there is nothing being manipulated and that Tsingshan are going to genuinely take the canceled metal out of warehouses for consumption there is really little the LME can do in the face of supply loss from Indonesia,” Freeman added. “If this turns out to be reality, the recent spread contango could be very short lived and prices of $18,000 and higher could be a distinct possibility.”

Nonetheless, nearby LME nickel spreads remain in contango, with the benchmark cash/three-month spread trading in a $15 per tonne contango today, slightly narrower than $20 per tonne yesterday but significantly wider than the $180 per tonne backwardation of October 21.

Other highlights
  • The US dollar index was trading up 0.06% around 97.54 during the morning session on Wednesday October 23, exerting a dampening hold on all LME base metals bar zinc, which was trading up a marginal 0.6% at $2,481.50 per tonne
  • Brent Crude oil futures were trending lower during the morning’s trading, down 0.22% to $57.38 per barrel amid reports of another imminent inventory build despite an anticipated 1.6% production cut from the Organization of Petroleum Exporting countries (OPEC) in December
  • The United Kingdom government continues to vote on government’s Brexit deal today, having approved Prime Minister Boris Johnson’s Withdrawal Agreement bill, the first stage of the process, by 329 votes to 299 on Tuesday October 22. Market impact is expected to be significant.

Amy Hinton

amy.hinton@fastmarkets.com

Published

Amy Hinton

October 23, 2019

10:33 GMT

London