Nickel prices ran up to a three-year high of $14,420 per tonne on February 15. There are still plenty of excitable headlines about the electric vehicle revolution, their batteries and the importance of nickel in them. This is surely buoying nickel prices to some extent. We should not overlook the supply deficits in 2016 and 2017 (and again in 2018, we believe) that occurred without batteries yet having started to meaningfully impact fundamentals.
Indeed, LME stocks have really started to accelerate lower recently, helping to underscore the fact that this market has turned a corner. They only declined a net 4,290 tonnes in 2017, but already this year they are 30,000 tonnes lower. We should be wary; stocks are still high by historical standards and large, sudden inflows of copper and aluminium recently warn that seemingly meaningful stock downtrends can be undone overnight, especially in a market like nickel where large stockpiles are being financed off-market thanks to the wide contango.
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