London Metal Exchange nickel settled in an official cash to three-month backwardation on Friday April 25 on a flurry of cash buying in the second trading ring.

Three-month nickel settled at an official price of $18,460/65 per tonne as the cash price settled at $18,425/50 per tonne.

Nearby spreads remained in contango and the tomorrow-next day spread was trading in a contango of $0.80 at the time of writing.

“There was a lot of cash buying on the day; essentially too much buying and not enough selling,” a category II trader told Metal Bulletin.

Nickel prices have been rising since Indonesia's ore export ban pushed up raw materials prices, leading to higher prices and premiums for products further downstream.

European nickel demand has been increasing due to improved stainless steel melt rates, while hedge funds and other short-position holders have been covering shorts and reversing positions.

“I know there’s been good two-way interest, and the CTAs, who had been short, are now covering positions and going long. When hedge funds go long there’s no lending happening,” the trader added.

“Bull markets have a backwardated curve; it’s typical. This is the first sniff of a good story and people are jumping on it,” the trader added.

“It’s a justifiable rally, it’s been overdone but that doesn’t mean it won’t continue,” he added.

Three-month nickel traded to an intraday high of $18,496 per tonne and no lower than $18,099 per tonne.

Nickel stocks in LME-bonded warehouses rose 678 tonnes to 277,734 tonnes.

See also:

Nickel could reach $25,000 per tonne over next 12 months – Bank of America

Janie Davies

Twitter: @janiedavies_mb