Spot premiums for nickel surge in Europe amid significant volatility

Increased concerns over the potential impact of the Russia-Ukraine conflict and volatile price action in LME official nickel prices has caused spot premiums for nickel to surge in Europe while participants seek to secure material

Concerns have been building within the market over potential sanctions towards Russian material, of which Europe is heavily reliant upon. Sources have estimated that Russian material makes up around 50% of European supply.

“The industry won’t collapse [if Russian material is sanctioned] but it will need to scale back significantly,” one trader in the region told Fastmarkets.

The nickel market in Europe is experiencing persistent acute tightness, which is reflected in LME warehouse stocks in the region - stocks stand at just 39,786 tonnes.

Whilst nickel has yet to be included in any official sanctions, many companies said they are taking official action to avoid Russian-origin material and cut ties with Russian businesses. Some banks are also reportedly refusing to finance deals involving Russian material as part of this. This has therefore driven up premiums for non-Russian origin material, participants said.

On top of this volatility, the LME has now been forced to suspend nickel trading following reportedly the largest price move in the history of the exchange. The LME three-month nickel price increased by 111% from $48,919 per tonne at the 5pm close on March 7, to a $101,365-per-tonne peak on March 7.

Amid this volatility, the most significant premium move was in briquettes.

Fastmarkets’ assessment of the nickel briquettes premium, in-whs Rotterdam surged to $700-1,400 per tonne on Tuesday from $240-300 per tonne the previous week, following higher assessments from participants and business reported above the new range.

Participants are having difficulty in knowing the current true market for premiums.

“It’s impossible to know the premium at present because there is so much volatility,” a second trader in the region noted.

Many in the market noted that they were no longer active in the spot market as a result of the price volatility.

There were also reports of distress purchasing, with a deal reported for uncut cathodes with premiums close to $10,000 per tonne agreed as participants desperately look to find non-Russian material available for fast delivery.

Fastmarkets’ assessment of the uncut cathode premium, in-whs Rotterdam was unchanged this week at $140-160 due to a lack of liquidity reported to Fastmarkets, with a number of participants unable to offer material.

Some participants told Fastmarkets they expect premiums to increase amid the volatility, with acute tightness persisting in Europe and just 6,966 tonnes in LME sheds in Rotterdam. However, the price move was capped for this week.

Fastmarkets will look to assess the reflective premium of the competitive market in coming pricing sessions.

Spot liquidity expected to decline

Participants noted that the new high price environment on the LME was reducing demand from consumers.

“Now the market is just going crazy [in terms of price], I think it’s nearly impossible to do spot business at this moment,” a third trader in the region told Fastmarkets.

Previously the market had reported steady demand for nickel products, but the new complications over Russian material and record price levels mean that demand could soon decrease.

“At these levels, people just aren’t interested in buying material,” the second trader added.

“Premiums will begin to take a backseat If this price volatility continues,” a producer noted.

“Most buyers, for now, have been instructed to stop spot buying any nickel-based products/scraps for now until things settle down,” another source told Fastmarkets.

The LME suspended nickel trading at 08:15 GMT, with the price level at $80,000, having declined since the morning peak. The LME has since canceled all trades placed after 00:00 GMT on March 8 and has halted the publication of official, closing nickel prices.

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