Clama Trade

Milan 30/08/06

Nickel deliveries
Nickel deliveries into London Metal Exchange-approved warehouses in Europe are largely Russian-origin material that's already accounted for and won't ease the market tightness as a result, industry traders told Dow Jones Newswires Thursday.
The deliveries have been anticipated since around 20,000 metric tons of material arrived at the Russian Arctic port of Dudinka in mid-July after it resumed shipping following the end to the ice breaking season on the Yenisey River.
Dudinka is the only export outlet for Russian producer Norilsk Nickel (GMKN.RS).
This metal now showing up in LME-approved warehouses, although its entry is being swiftly followed by its move onto canceled warrant, indicating it's accounted for and likely to be drawn down.
So although LME data showed nickel stocks rose by 426 tons to 6,666 tons Wednesday, 70.66% of this was on canceled warrant, leaving just 1,956 tons available.
Earlier Thursday, LME data showed nickel inventories dropped 240 tons to 6,426 tons while canceled warrants rose to 73.30% from 70.66%, meaning only 1,716 tons of metal is available to the market. One day's global nickel consumption runs at around 3,500 tons a day.
"As soon as the metal enters warehouses it's moving onto canceled warrant and is soon shipped out," a trader said.
The nickel drawdowns Thursday were in LME warehouses in Rotterdam (180 tons) and Helsinborg (60 tons).
Traders said it looks like some European locations with nickel remaining may soon see their stocks of the metal dwindle to zero, like many other locations have seen. All of nickel held in warehouses in Belgium's Antwerp (60 tons), Germany's Hamburg (246 tons), Sweden's Gothenburg (132 tons), the U.K.'s Hull (174 tons) is on canceled warrant, LME data shows.
This is to be expected at Gothenburg, however, as the LME recently said it plans to delist that location as an approved warehouse, meaning the material there will have to be moved elsewhere.
The tight inventory situation and stronger than expected demand for the stainless sector have catapulted LME nickel prices higher in recent weeks.
LME three-month prices are now hovering close to all-time highs, having peaked at $30,000/ton Wednesday. At 1350 GMT, LME nickel was trading at $29,600/ton.
Concerned of a settlement default, the LME stepped into calm the market last week and imposed a $300/ton limit on the daily backwardation.
LME data also shows that a single customer or a consortium of its customers has been sitting on 20%-30% of nickel market open interest for the November date. Some LME participants have been taking advantage of this and have been squeezing the shorts, traders said.
Nickel deliveries into Baltimore this week is metal attracted as a result of the LME's backwardation limit, as a large backwardation sometimes deters purchases of physical metal because of the cost of financing it, traders said. Nickel entering LME warehouses in South Korea's Busan is being delivered against a LME futures short position, traders added.

Commodity Strategists: Nickel
Nickel supplies may fail to meet demand this year as purchases by steelmakers and manufacturers jump as much as 10 percent, Societe Generale SA said.
There may be a deficit of 25,000 metric tons this year, compared with an earlier forecast of a surplus of 20,000 tons, analysts led by Paris-based Frederic Lasserre at France's third- largest bank said in an Aug. 25 report.
Prices of nickel, used to rustproof steel, reached the highest in at least 19 years on Aug. 22 as companies including Outokumpu Oyj increased output of stainless steel. Stocks of nickel tracked by the London Metal Exchange have dropped 83 percent this year as mining companies such as Inco Ltd., the world's second-largest producer, reported supply disruptions.
``It was always likely that stainless steel would rebound but few can have expected the surge in world production,'' Societe Generale said. Nickel demand ``now looks set to exceed the 8-9 percent predicted by some commentators.''
Demand from developed countries is leading consumption, the analysts said. Manufacturers in Western countries will probably buy 1.075 million tons of nickel this year, up from an earlier forecast of 1.02 million tons, the bank said. The nickel market may remain in deficit of 30,000 tons next year, the bank said.
Stainless steel production may jump 20 percent in the third quarter of the year, from 2005, according to London-based independent steel researcher CRU, Societe Generale said.
Lasserre has worked for Societe Generale for the past 10 years after teaching economics and finance at the Bordeaux Business School in France.
Inventories Drops
Inventories monitored by the London Metal Exchange have dropped to 6,120 metric tons. Prices have more than doubled this year, and reached $29,950 a ton on Aug. 22, the highest in at least 19 years according to Bloomberg data. The metal closed at $29,400 a ton on Aug. 25 in London.
``Whilst supply disruptions have certainly played a role, the driving force has undoubtedly been the astonishing cyclical recovery of demand,'' Societe Generale said.
Mining companies lost as much as 25,000 tons of production in the first-half of 2006, or about 2 percent of total global output last year. Shortfalls will likely continue in Indonesia, and may be worsened due to a strike at Toronto-based Inco's Voisey's Bay mine, the bank said.
Strike Cuts Output
PT International Nickel Indonesia, a unit of Inco and the Southeast Asian nation's largest nickel miner, had an accident at its furnace in May that will cause output to drop to 158 million pounds for the year, down from a target of 167 million pounds.
A strike at Inco's Voisey's Bay mine in Canada may drag on for months, a union executive said Aug. 2. The strike at the mine, which produces about 4 percent of global nickel output, began on July 28.
Demand has also risen in China, where stainless steel production will likely rise more than 25 percent to 4.7 million tons this year, according to Beijing Antaike Information Development Co., which advises the Chinese government on industry policies.
Chinese consumption will boost nickel demand by 35,000 tons, or half the projected increase in global demand, Xu Aidong an analyst at Antaike said July 7.
Global nickel use may rise to 1.33 million tons this year from 1.26 million tons last year.