LME nickel price soars, narrowly avoids ‘disruption event’ as base metals futures mostly rise

Base metals futures on the London Metal Exchange gave an overall positive performance during the morning trading session on Monday November 14, with the metals mostly continuing their upward trajectory from the previous week

Nickel was the key metal to watch though after the three-month futures price narrowly avoided reaching its 15% daily moving limit. Should any metal reach this moving limit, a ‘disruption event’ will occur and trading will be suspended for the day.

The three-month futures prices at 9.00am were as follows, compared to the previous 5pm close:

Copper: $8,513 per tonne, up 0.2%
Aluminium: $2,459.50 per tonne, down 0.2%
– Nickel: $30,140 per tonne, up 12%
– Zinc: $3,082.50 per tonne, up 2%
– Lead: $2,169 per tonne, up 0.3%
– Tin: $21,400 per tonne, up 0.4%

Market participants were focused on the nickel price, which quickly soared to an intraday peak of $30,960 per tonne just after 9am, representing a 14.98% increase in the contract price, just $3 away from the 15% limit.

The three-month nickel price has since retreated somewhat, but it remains at significantly high levels, most recently at $30,185 per tonne.

This significant surge in the nickel price has come on markedly low volumes, with just 1,045 lots traded.

There was a notable emergence of strike call options on the LME for $40,000-50,000 per tonne for December 2022, raising concerns that the nickel market could be pushed through a period of further volatility in what has already been an extraordinary year.

The shift higher was notable for the absence of news as a driving force.

“Nickel stood out as the only base metal that still has its March-like vicious rally, with double digit gains,” Fastmarkets analyst Andy Farida said on Monday.

“Despite the sharp spike in the nickel price, we are unsure what was the major catalyst that brought about the move. The US Dollar Index appears to have found support near 106.50 and there is a relatively light schedule of economic data this week,” he added.

The nickel price had gained 13% over the course of last week while the base metals as a whole reacted positively to macro drivers that included better-than-expected consumer price data from the US on Wednesday.

“Most of the move up last week has been attributed to stop-loss buying, fund and [commodity trading advisor] buying and no doubt with a few [algorithmic traders] jumping on for the ride,” Kingdom Futures director Malcolm Freeman said.

“The LME base metals are pricing in a shift in macroeconomic dynamics,” Farida said.

“A weaker US Dollar Index, a soft US consumer price index reading for October and optimism over China’s plan to reopen its economy via the easing of its controversial Zero Covid policy are fueling the move higher in base metals prices. In addition, lighter funds positioning means new investors can push prices higher, a contrast to overcrowded trade conditions,” he added.

Elsewhere, the rest of the base metal complex was also trending higher, except for aluminium, as markets seem to be little affected by news late last Friday that the LME would be maintaining the ‘status quo’ in regard to the acceptability of Russian metal on the exchange.

The three-month copper price edged marginally higher, though there has been a significant movement in the LME warehouse stocks.

Around 10,275 tonnes of copper were reportedly delivered into LME warehouses on Monday, primarily to warehouses in Rotterdam. On top of this notable inflow, there was also a 12,900-tonne re-warranting of material in LME warehouses in Hamburg.

The moves buck a recent trend where copper stocks had been drawn down significantly on fear of market tightness for refined material.

Market participants were keeping a close eye on a meeting between US President Joe Biden and Chinese President Xi Jingping, taking place in Bali on Monday, which could signal the future direction of the relationship between the two nations.

For more information on the current nickel market, take a look at our dedicated page for nickel market analysis.

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