The 19,242 tonnes of nickel that appeared in LME sheds in Asia and Europe on Wednesday June 18 served as a painful reminder to nickel bulls.

The news fuelled suggestions that financing deals could be unwinding, and that material was being rerouted to LME sheds as a result of the Qingdao port probe.

The jump in volumes in exchange warehouses in Asia and Rotterdam could have been the result of a large short-position holder delivering against a futures position as the June contract matured on Wednesday, sources said.

Whatever was behind the dramatic stock jump, the fact remains that LME volumes of nickel reached a new record high of nearly 306,000 tonnes, after surging around 17% this year.

Compare this with the 160,000 tonnes of copper, a bigger market, in LME sheds and you’ve got what looks like a rather healthy – or worrying – stockpile.

The nickel price settled lower during Wednesday’s officials as a result, at $18,725/730 per tonne, basis three months, compared with $19,025/050 per tonne on Tuesday.

But the metal has gained 32% in value this year, the largest increase of all the base metals. The rise has been driven by concerns that supplies would decline after Indonesia, the biggest producer of mined nickel, banned raw ore exports in January.

So has Indonesian hysteria masked the bigger issue of high LME stock levels?

Well, bullish sources argue not. They remained unfazed by the surging refined metal stocks, noting that raw material shortages will eventually filter through to the refined metal market.

“At face value, you can see why this [stock rise] appears bearish,” one source said.

“Though people [...] forget that cancelled warrants are high and that LME purity is too high for most mills – so other sources of nickel will be used and the LME will be a last resort,” the source told Metal Bulletin.

“The small positions are long, though. I haven’t heard of anyone holding shorts,” he said.

“The call-put skew [is] around 4% still, so [the] market definitely likes the idea of prices going up rather than down,” the source added.

Three-month LME nickel was trading at $18,573 per tonne at 11.26am on June 19.

For now, with the wind taken out of nickel’s sails, the wild overnight price swings of May have disappeared, and the metal seems to have found more stability, settling between $18,000 and $20,000. 

And, while it’s a far cry from the $30,000-40,000 some had forecast (admittedly in the longer term), nickel is still some way off the $13,000-14,000 of the start of the year.