Nickel tumbled to a low not seen since 2011 in London, as investors treated a rally that boosted the metal’s price by 56% in 2014 as exaggerated.
The three-month delivery benchmark future plunged as much as 9.7% on Thursday, following a 4.6% tumble yesterday. Prices were down as inventories monitored by the London Metal Exchange advanced 6.8% in 2014. The metal’s relative strength for 14 days added 91 this week, the most since 2004 and suggesting overbought conditions to investors who track historical price behavior, Bloomberg reported.
Nickel rose nearly 35% since the end of January after Indonesia, the world’s top supplier of unprocessed ore, banned ore shipments. Prices soared despite a comparatively weak demand from stainless steel makers, said analyst Edward Meir of New York-based INTL FCStone Inc.
“The nickel juggernaut is sputtering. Rising inventories are “telling us that there is no mad scramble for” supplies,” Meir said.
Three-month delivery nickel was down 5.7% to $18,888 per metric ton as of 4:19 pm in London, on course for the biggest flop since September 2011. Prices closed at $21,000 on May 13, a high not seen in 27 months.
“Talk about skimming speculative froth. This looks like the funds are pouring beer down the sink,” said Michael Turek of New York-based Newedge USA LLC.
The rise in nickel stockpiles calmed fears that Indonesia’s ban would negatively affect global supplies. Beijing Antaike Information Development Co said China, which is the world’s biggest buyer of the commodity, has adequate ore supplies to manufacture nickel pig iron, a lower-grade alternative to the processed commodity, up until August.
Prices were also up on fears that the US and Europe may impose further sanctions on Russia, the world’s second-largest producer of processed nickel after its army marched into Ukraine.
According to The Australian, Goldman Sachs said Nickel’s fundamentals stayed bullish.
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