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Yippee I Aye - Remember this one Sec, bring it on!
quote:
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Originally posted by tricha
$20 a ilb for Nickel is looking extremely possible. The way this is plunging it could be on the cards!
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Naah, would love to see it happen, but highly unlikely. Although the LME warehoused nickel stocks can barely fill one of their back offices now, don't forget buyers can source their nickel from other than the LME. Read the latest ABARE commodities report to put the LME stockpile in perspective.
SEC
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You are sure right about a re-rating for nickel stocks Sec.
Nickel Drops After London Metal Exchange Trading Restrictions
Aug. 17 (Bloomberg) -- Nickel fell for the first session in seven after the London Metal Exchange imposed trading restrictions to ease a shortage of the metal.
The LME, the world's largest metals exchange, yesterday limited the cost at which short-position holders can borrow the metal. The intervention came as plunging stockpiles helped push prices for the metal, which is used in stainless-steel making, to a record. It was the first time the exchange imposed such restriction on nickel since 1988.
``It's very likely that it will destabilize the market and it's very likely that people will stop buying for a while,'' said Gueorgui Pirinski, a stainless steel analyst at metals consulting company CRU in London.
Nickel for delivery in three months on the LME dropped $900, or 3.1 percent, to $28,200 a metric ton as of 10:28 a.m. The metal surged to $29,200 a ton yesterday, the highest since at least 1987. It has more than doubled this year.
Stockpiles of nickel tracked by the LME dropped 42 tons, or 0.7 percent, to 6,120 tons, the exchange said today in a daily report. The inventory has plunged 83 percent this year.
Nickel supply this year will lag behind demand by 30,000 tons, Inco Ltd., the world's second-largest nickel producer said in July. Stainless-steel output will grow 8.6 percent to 26.4 million tons, the International Stainless Steel Forum said in June.
``There's a real scarcity'' of nickel, said Friedich Kernstock, who trades industrial and precious metals at Kernco Metal Trading GmbH in Austria. ``When we asked for the material from producers, they said they don't have any spot metal until end-October.''
Copper also dropped in London, falling $100 to $7,600 a ton. Aluminum declined $16 to $2,485, zinc slipped $20 to $$3,380, lead was unchanged at $1,227 and tin gained $35 to $8,500.
To contact the reporters on this story:
Chanyaporn Chanjaroen in London at
cchanjaroen@bloomberg.net;
Matthew Craze in London at mcraze@bloomberg.net
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I still think $20/lb is in your dreams Tricha, but will remain looooong on Ni, unlike the unfortunates who are short, like Posco.
Would love to be proved wrong. If so, I'll invite you to my island resort I'd just have bought!
SEC
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Nickel below peak after LME intervention
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Nickel futures held below record highs on Thursday as physical metal stocks dwindled and after the London Metal Exchange (LME) intervened to prevent any contract defaults, dealers said.
Nickel closed at a record peak of $29 200 on Wednesday as available stocks of metal in LME warehouses fell further, prompting the exchange to intervene overnight for the first time since 1988 by limiting cash premiums to $300 a day.
"Nickel stocks are at historically low levels and we now have a genuine material shortage. Our first priority is to ensure that trading remains orderly and to prevent the risk of settlement defaults," Simon Heale, LME Chief Executive, said on Wednesday.
The LME's special committee said anyone with a short position in nickel falling due from Friday who was unable to make physical delivery could defer for one day at a penalty of $300 per ton.
"I suppose the intervention was inevitable," an LME trader said, adding that it could attract more metal to the market.
Prices were expected to remain strong as stocks fell 42 tons to 6,120 tons on Thursday.
Of that, just 1 248 tons were available on uncancelled warrants to support the 1,3-million ton-per-year market.
ABN AMRO analyst Nick Moore said the value of available nickel in LME warehouses totalled $44-million.
"We have run out of nickel effectively. There is a massive squeeze in place and unless producers can be persuaded to put metal onto the exchange the pricing tension will remain acute," he said.
An LME spokesman said: "In the past stocks have never reached zero. The interaction of supply and demand has ensured that more material flowed into warehouse."
In the official rings, nickel fell to $28 650 on profit-taking.
"The market is very messy - verging on the disorderly, but the shorts have gotten off lightly at $300, I would have made them pay $1 000," a fund source said.
He said going short, or betting that prices would fall, was a very risky strategy.
"We have almost hit $30 000. I don't want to predict where prices will go, but the trend is very strong. I certainly wouldn't suggest going short," he said.
The tightness in the supply was also highlighted by the hefty premium for cash metal above three-month contracts of $3 500/$4 000 a ton.
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I have a question for those more (or maybe less) knowledgable than I on shorting
Why would anyone in their right mind short nickel when it is in such a critical supply shortage ???
This would surely have to be an EXTREMELY RISKY action !!!
To my way of thinking it would be tantamount to taking a very risky bet at long odds, taking such action out of the realms of investing and into the realms of gambling
I bet there are nickel shorters out there who are suffering sleepless nights at present, but I guess that their bowels will be very active as they must be fair sh-tting themselves
Any other thoughts on this ?
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...prices for NI are very high because there is a squeeze on supply of the metal
...speculating forward, this situation seems to be unsustainable because supply will meet demand eventually...and prices will start falling...therefore 'short' seems to be a valid investment decision looking ahead...
but:
...shorting is risky at this stage because no one knows when the demand/supply imbalance will be levelled again and in the meantime prices could escalate further...therefore 'long' would be the immediate safer investment decision...
Kind Regards
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ananda
Your last sentence sums it up in my opinion
Although supply will match demnand in the longer term the present CRITICAL SHORTAGE must surely mean that prices are likely to rise further in the immediate future
I will be watching with much interest --- time will tell
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...what happens though when the NI-market will collapse completely???
...impossible to have high prices for no product...and prices will collapse as well
Kind Regards
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I cant see a complete collapse in the nickel price as there is tremendous demand for it for stainless steel
Those prepared to pay the top price will capture the small amount of product available --- the old and well tested law of supply and demand
This is just my opinion, I see the nickel price reducing IN THE MEDIUM TERM to around US $7 to $9 per pound
Whether or not I am somewhere near the mark will be revealed in the next 18 months or so
I firmly believe that nickel stocks will produce extra good profits in the next couple of years, especially those that are up and running with relatively low production costs
I hold MCR, an excellent company in my opinion
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Nickel, a Base Metal, Is Scaling Speculative Heights Daniel Acker/Bloomberg News
By VIKAS BAJAJ
Published: August 18, 2006
Considered bewitching by miners in Saxony who got skin rashes from handling it hundreds of years ago, nickel has recently cast a spell of a different sort on world financial markets.
This week, the metal’s surging price and falling stockpiles prompted the London Metal Exchange to impose restrictions on its trading, warning that “we now have a genuine material shortage.”
Since the start of the year, nickel supplies in warehouses approved by the exchange have fallen 83 percent while the price has risen 105 percent, the greatest increase among base metals.
In London yesterday, prices of nickel futures dropped 5 percent, to $27,700 a metric ton, suggesting that the exchange’s restrictions were having some effect.
Like other commodities, the price of nickel — which is used in making stainless steel, among other things — has been on a steep, rising curve in the last three years as producers have been unable to keep up with the voracious appetite of China, and to a lesser extent, India, for metals and other materials on which industrial economies are built.
And with most of the easiest deposits already tapped, mining companies are having to venture deep and far to obtain metals like copper, zinc and nickel.
After a brief slump in June, nickel prices rose steadily and began surging early this month as rumors swirled in London that a big buyer had made a substantial bet that the price of the metal would fall by selling 10,000 metric tons of it short. One report identified the seller as Posco, a large South Korean steel maker, but the company denied that.
In short sales, investors sell a borrowed commodity or a stock that they believe they will be able to buy later at a lower price. If the price falls, the trader can make a handsome profit. But if prices continue to rise, the seller must scramble to return the borrowed stock or seek to delay delivery, both of which can deal the trader a substantial and theoretically unlimited loss. If the bet is big enough, the seller’s desperation to buy can itself propel prices higher.
It may be impossible to know who sold how much nickel short, and “it’s not actually that relevant,” said Kevin Norrish, an analyst with Barclays Capital. He contends that nickel’s price is being driven up by fundamental factors. In a report released this week, the International Nickel Study Group, an organization of producing countries, said that demand for the metal was exceeding current production levels.
And Mr. Norrish added, “You have got lower production coming through than people had expected.”
To ease supplies in the short run, the London Metal Exchange beginning today, has imposed a daily limit of $300 a metric ton on how much short sellers have to pay to delay delivery of any nickel they have borrowed that is due to be returned. Previously, the price to delay delivery was set by the market and could run into thousands of dollars a ton. “It helps the market to operate in an orderly fashion without getting out of control,” a spokesman for the exchange, Adam Robinson, said.
The making of stainless steel takes up two-thirds of nickel production, with the rest going into aerospace, batteries and other uses. (The use of nickel in coins is minimal, and it makes up just 25 percent of the coin that bears its name; copper makes up most of it.)
Russia is the largest supplier of the metal, followed by Canada and Australia, but increasingly mining companies are looking to places like Indonesia and New Caledonia, a South Pacific island group long associated with the nickel trade.
In 2005, worldwide nickel production rose 7 percent, to 1.5 million tons, but output this year is slowing because of disruptions and delays at some big mines and production operations.
In the meantime, the strong global economy and a boom in new steel pl