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Nickel along with other commodities has bounced over USD 11,800 per tonne, 10-week highs as stockpiles fall to fresh lows paring some of the losses suffered over the second half of 2018. Macquarie Bank forecast nickel to finish 2019 as the number one commodity.

Macquarie Bank Commodities 2019

Macquarie sees Platinum and Silver as the two next best commodities for 2019. Over 5 years the Bank sees uranium as the number one commodity over the next 5 years, with nickel second over the longer period. In mid-2018 nickel traded over USD 15,600 per tonne a three year high. The high prices saw a number of huge Indonesian nickel smelter projects announced, which fuele oversupply fears and pushing down prices which accellerated as equity markets and oil prices collapsed.

Last week we witnessed a furious bear market rally in Nickel on the London Metal Exchange (LME). Short-dated time-spreads flexed out to levels not seen in many years as a long-running decline in LME nickel stocks translates into cash-date tightness. The resulting bear rally reversed the six-month downtrend in the outright nickel price.

Nickle Futures Jan 22 2019

LME broker Marex Spectron estimated that funds were net short of nickel to the tune of almost 20 percent of open interest coming into January. The downtrend saw LME three-month nickel slide from $15,845 per tonne in June last year to an early-January low of $10,525 while in that slide however LME stocks were falling. Registered inventory was cut by 44 percent, or 160,212 tonnes, over the course of 2018 and last Friday the headline figure fell through the 200,000-tonne level for the first time since 2013.

 Macquarie Bank Commodities 2019 5 years

Live stocks, stripping out the metal earmarked for physical load-out, totaled 142,788 tonnes at the end of thet week, the lowest level since early 2014. Short nickel was a classic crowded trade at that point with the physical liquidity base  a question of who blinked first for short-position holders.

There is a fear at all the declared nickel tonnage could come to market quickly over the second half of 2019. Analysts at Wood Mackenzie disagrees saying;  

“Our view is that the timelines will be longer than implied so that the amount of nickel coming to the market will be smaller, slower and more costly than so far alluded to. This should be reassuring to the market. In fact, a consequent absence of commissioning news in the second half of 2019 should support higher prices.”

Despite these oversupply fears, Macquarie and Wood Mackenzie take the view that demand excedes supply for nickel at this time.

Source : Macquarie Bank

From The TradersCommunity Research Desk

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