Nickel back in play. Nickel’s wild moves continue as LME price jumps by 15% limit Bloomberg News | March 23, 2022 | 8:48 am Markets Europe Nickel Stainless steel tanks. (Stock Image) Nickel price jumped by the 15% daily limit on the London Metal Exchange, adding to a string of sharp price moves as the market seeks to reset following an unprecedented short squeeze and week-long trading halt. Prices were 14% higher after briefly hitting the new intraday limit that the LME introduced this month to help stabilize the market. While nickel futures reopened on March 16, trading had been effectively frozen until yesterday, as the metal plunged by the limit at the open each morning. Nickel prices soared 250% over two trading sessions in early March, touching a record $101,365 a tonne amid a short squeeze focused on China’s Tsingshan Holding Group Co. Following a series of interventions by the exchange, including the weeklong suspension and the cancelation of billions of dollars of trades at the highest prices, the market then plunged. It is now down about 70% from the record high, but up more than 30% from the start of the month. Trading started slowly on Wednesday but gained pace as prices spiked toward the limit, with more than 2,600 contracts changing hands by 10:25 a.m. While Tsingshan has struck a deal with its banks to avoid further margin calls, there are still a large number of bearish bets in the market that need to be unwound — and at a time when fears over supply are growing. Prices are now broadly in line with nickel contracts on the Shanghai Futures Exchange, which rose less sharply during the turmoil in early March, and tumbled amid a broad selloff across commodities during the weeklong suspension on the LME. Trading is becoming increasingly illiquid on the LME, with many investors looking to liquidate their positions in the wake of the metal’s unprecedented volatility. Metals trading on the Shanghai futures market has also started to go quiet, with investors growing cautious as China battles to control the spread of Covid-19 in its industrial heartland. China, the world’s largest base metals producer, and consumer is fighting its worst coronavirus outbreak in two years. Lockdowns in the country’s industrial bases, such as the top steelmaking hub of Tangshan as well as the commercial center of Shanghai, have hit all aspects of life, from logistics to manufacturing to consumption. Nickel traded 14% higher at $32,240 a tonne at 10:36 a.m. local time. Zinc rose 2.6%, while copper climbed 0.7%. Shanghai nickel contracts closed up 2.5% at 212,000 yuan a tonne. (By Mark Burton, Jack Farchy and Alfred Cang)
Another crazy day with super strong nickel. I'm assuming Russia crisis has a lot to do with this. Also strong moves on lithium.
LME metal inventories plunge to critical levels Alex Gluyas Markets reporter Apr 8, 2022 https://www.afr.com/markets/commodi...ies-plunge-to-critical-levels-20220408-p5abwl Inventories of base metals in London Metal Exchange warehouses have plummeted to critically low levels, sparking fresh concerns of a spike in prices that would leave physical commodity markets vulnerable to a short squeeze. Available stockpiles across the six main contracts on the LME – copper, aluminium, zinc, lead, tin and nickel – have fallen to the lowest level on record based on data going back to 1997, Bloomberg says. Total LME inventory of the six metals has plunged to just 500,000 tonnes from about 6 million tonnes in 2010. Copper anode sheets hang as they cool. Andrey Rudakov “The fact inventories are drawing down as far as they have shows that we’re in a deficit market where strong demand is being met with short supply,” said James Stewart, portfolio manager of Ausbil’s Natural Resources Fund. “When inventories drop to these sorts of levels, it means prices are likely to move higher, and also increases the likelihood of a squeeze.” Analysts have pointed to zinc being particularly susceptible, with stocks in LME warehouses falling 40 per cent since December to 127,675 tonnes, lifting prices this week to the highest level since 2006. Reports that commodity trader Trafigura, and other companies, are withdrawing significant volumes of zinc from LME warehouses to make up for a shortfall in global supplies is placing further pressure on markets. “The risk is rising of a squeeze in the LME zinc market,” said Warren Patterson, head of commodity strategy at ING. Freely available zinc inventories have now shrunk by more than 60 per cent in less than three weeks as high power prices force smelters to cut back production. Strategists are warning that a fresh surge in power prices could place further strain on zinc supply. The concerns follow a historic short squeeze in the LME nickel market last month which triggered a 250 per cent spike in prices, forcing the exchange to impose a 15 per cent limit on intraday swings. Copper ‘sleepwalking' to stock out Goldman Sachs, meanwhile, has warned that copper inventories are at risk of being wiped out entirely, a probability which analysts say is not being reflected in the metal’s price. “In the past six months, we have become increasingly concerned of a stock-out episode in the copper market as forward fundamentals have tightened even as price action has remained muted,” said Nicholas Snowdon, metals strategist at Goldman. “Without any apparent softening adjustments already underway, we believe higher prices are an inevitability – required to stimulate substantially more scrap supply as well as accelerate demand destruction to balance this market.” The broker increased its forecast deficit in refined copper this year to 374,000 tonnes, double its previous estimate, which would be enough to deplete visible stocks by the fourth quarter. Goldman also lifted its deficit projections for 2023 to 161,000 tonnes, from 28,000 tonnes previously, and 366,000 tonnes in 2024, from a prior forecast of 187,000. Tangled supply chains The tightening across copper markets caused the broker to raise its price targets for the metal to $US11,500, $US12,000 and $US13,000 a tonne on a three-, six- and 12-month basis, and implying a fresh record high by July. “Despite these tightening tailwinds, copper prices have only risen modestly this year and positioning has remained flat, offering a clear entry point for investors to get long,” Mr Snowdon said. The worsening outbreak of COVID-19 in China, where Shanghai reported over 20,000 cases on Thursday, has placed further stress on supply chains but has also kept a lid on base metal prices given the country is a major importer of commodities. “Vessels have started to queue up again in Shanghai amid the recent COVID-19 outbreak and local lockdowns, which is leading to more logistical difficulties and potentially higher freights and a longer lead time to get the metals distributed,” ING’s Mr Patterson said. However, strategists observed that signals remain bullish on demand, and China’s recovery post-COVID-19 could be bolstered by monetary stimulus.
Monthly Chart One may reason lithium will recover from here, the USA signals I'm getting, lithium is going down. Time to jump out, I've been dumping lithium stocks lately as I'm also seeing lithium stocks overbought signals on ASX, and geewhiz, some sure have had a spectacular run. Take the money and jump boyz and girlz!
Copper Goldman sees a massive run brewing for copper amid falling stockpiles to critically low levels By Kerry Sun Mon 11 Apr 22 https://www.marketindex.com.au/news...brewing-for-copper-amid-falling-stockpiles-to Source: iStock / Photology1971 Key Points Global copper stocks fell in March, traditionally a seasonal surplus phase Recovering demand, underperforming supply and copper scrap recycling tightness are the main drivers of supply tightness Goldman forecasts prices to rise as much as 15% in the next 12-months Goldman Sachs said copper is “sleeping towards a stockout” in a note last Friday. The investment bank flagged that global exchange copper stocks fell through March during what is traditionally a seasonal surplus phase. A combination of strong demand from developed markets, a recovering China, underperforming Chilean mine supply and scrap tightness were viewed as factors driving the “extreme fundamental turn” for copper markets. Goldman analysts doubled their forecasted refined copper deficit to 374,000 tonnes, followed by “enlarged deficit projects for 2023 and 2024.” “Without any apparent softening adjustments already underway, we believe higher prices are an inevitability - required to stimulus substantially more scrap supply as well as accelerate demand destruction to balance this market.” Get long Copper prices have risen just 5.6% year-to-date to US$4.71/lb. Copper briefly broke out on 4 March to an all-time high of US$5.04 before reversing back to the US$4.6 to US$4.8 level. Source: TradingView "Despite these tightening tailwinds, copper prices have only risen modestly this year and positioning has remained flat, offering a clear entry point for investors to get long." “This clear sequential tightening trend in copper market conditions already and ahead leads us to raise our price targets to US$11,500, US$12,000 and US$13,000 a tonne on a 3, 6 and 12 month basis.” Covering the price targets back to lb, this equates to: 3 months: US$5.2/lb 6 months: US$5.44/lb 12 months: US$5.9/lb
Fake Tesla release sends lithium miner’s stock on a wild ride Bloomberg News | April 13, 2022 | Markets USA Lithium https://www.mining.com/web/fake-tesla-release-sends-lithium-miners-stock-on-a-wild-ride/ Stock image. Shares of Lithium Corp. whipsawed on Wednesday after an inauthentic press release circulated claiming electric-vehicle giant Tesla Inc. had acquired the Nevada-based miner. Lithium Corp.’s stock more than tripled to $1.09 shortly before noon in New York before paring its gain. The shares were trading up about 25% at 1:16 p.m., while Tesla shares rose 3.1% to $1,017.19. Screenshots of the bogus press release about a deal had been shared earlier on Twitter, including by well-followed fans of Elon Musk’s company. Tom Lewis, chief executive officer of Lithium Corp., told Bloomberg News that the deal was “fake news.” He added that the release didn’t come from his company and he was unsure where it came from. Lithium Corp. subsequently issued a press release stating that it had not received “so much as an expression of interest from Tesla.” The company said none of its employees had left to join Tesla but that Lithium Corp. would be “happy to chat with Elon if he was inclined.” Tesla didn’t respond to requests for comment from Bloomberg. Some media outlets reported the false claims from the original press release. Lithium is key metal used in the production of EV batteries. Images of the release appeared to show it was sent by 5W Public Relations, which denied distributing it. “We do not know the origin of the press release or why our contact information is listed. We did not issue this release as we do not represent either company,” a spokesperson for the agency said. (By Ed Ludlow)
WA miners short 10,000 workers, border reopening no panacea Michael Bennet WA reporter Apr 14, 2022 https://www.afr.com/companies/minin...s-border-reopening-no-panacea-20220414-p5adgk Western Australia’s mining industry is short more than 10,000 workers despite the state’s hard border being lifted, according to new analysis that shines a light on the lingering side effects of the McGowan government’s cautious management of the pandemic. Since WA’s borders reopened to quarantine-free travel on March 3, broking analysts and investors have been visiting companies and mine sites to assess the engine room of the nation’s mining boom after being locked out for large periods in the past two years. WA’s mining sector is struggling to fill skilled labour shortages. BHP Fresh from a recent trip where he visited more than 20 mining companies, Goldman Sachs analyst Paul Young said it highlighted “acute cost inflation”, with labour costs spiking up to 20 per cent in the past year amid higher diesel, chemical and steel prices. Mr Young said all up, capital expenditure budgets had jumped about 10 per cent, “driven by higher steel, labour and concrete, but also a lack of maintenance and construction workforce”. “Anecdotal evidence suggests WA seems to be short over 10,000 workers, with the border opening only seeing modest inflows of interstate and international workers thus far,” he said. According to a survey released by the Chamber of Commerce and Industry WA this month, four out of five businesses considered skilled labour shortages to be a barrier to growth, up 2 percentage points since the December quarter when the border was closed. Concerns were “most acute” in the resources sector, with more than nine out of 10 citing skills shortages as a barrier. Low unemployment The hot demand has pushed WA’s unemployment rate down to 3.4 per cent in March, the lowest of any state, as the national rate held steady at 4 per cent, the ABS announced on Thursday. However, it is also raising concerns about unsustainable wages and project blowouts similar to previous mining booms. Even though many industries across the nation are struggling with similar headaches, they could offset some of the gains WA’s mining sector is generating from the boom in commodity prices flowing to shareholders, and the state and federal governments. Mr McGowan this week trumpeted the sector’s record $230 billion in sales in 2021 as COVID-19 was kept at bay, claiming WA accounted for more than half of national goods exports and that the state “carried the nation through the pandemic”. But he made little mention of the flow-on skills shortages or inflation, and how they would affect miners’ growth. Speaking at a mining event late last month, Genesis Minerals chief and former Saracen boss, Raleigh Finlayson, said getting talent into WA was one of the “major impediments” faced by the industry, which made culture and initiatives to attract and retain workers even more important. Outgoing Chamber of Minerals and Energy of WA chief, Paul Everingham, said the reopening of the border was welcomed but not a “silver bullet” for the “skills squeeze”. He welcomed the federal government’s budget measures to incentivise hiring more apprentices, and the WA government’s “Driller’s Offsider Job Ready” program announced this week to provide entry-level employment in drilling roles, but said more skilled foreign migrants were also needed. “While training has a vital role to play in addressing skills needs in the longer run, the $156 billion of projects in the WA resources pipeline also highlights the critical contribution targeted international skills migration can make in the shorter term,” he said. ‘Get on with life’ Bill Beament, the chief of base metals explorer and mining services business Develop, this month told Euroz Hartley’sFinding the Frontpodcast that the state’s lack of skilled labour was a multi-pronged problem, at the same time as demand for “future-facing metals” such as nickel, lithium and rare earths was soaring. Asked for his view on WA as a destination, he labelled it “difficult” as all sectors struggled with labour shortages, supply chain bottlenecks and the side effects of WA’s COVID-19 policies, including the toll on mental health. He said even though the state had done an “amazing” job through the pandemic, it was time to “get on with life” like the rest of the developed world. “The state’s booming, but we need people,” he said in the podcast, released this month. “We’re setting ourselves up like in 2007-2008 where the bubble pops and all of a sudden, everyone’s gone and bought more expensive houses, they’ve bought boats, cars, everything [because] we’ve got artificial inflation with wages and that, at the moment, that’s unsustainable. “And I don’t want to see that happen again, and hopefully it doesn’t, but it’s not right at the moment, it’s just too artificial.” WA on Thursday reported 8144 new COVID-19 cases, lifting “active” cases across the state to 40,539. Goldman’s Mr Young said greater spread in the state had so far had little impact on mine sites and production. However, lithium producer Pilbara Minerals on Tuesday said COVID-19 cases had taken a toll on production in the March quarter, and UBS analysts on Thursday warned that virus spread and absenteeism would impede the quarterly output of other miners.
Lithium frenzy can’t last: BHP says it’s staying out James Attwood May 8, 2022 https://www.afr.com/companies/minin...ast-bhp-says-it-s-staying-out-20220508-p5ajic Among elevated metal prices, lithium stands out, as booming electric-vehicle sales send the battery component skyrocketing. Conspicuously, the world’s biggest mining company has no plans to join the rush. For BHP Group, the frenzied talk about looming lithium shortages in a clean-energy transition will fade given it is one of the more abundant elements in nature. Ironically, given the silvery-white metal’s role in helping replace fossil fuels, there are also environmental reasons behind BHP’s lack of interest. While lithium mining is “definitely within our skill set,” BHP prefers its projects to be large, long-life and scalable in commodities with differentiated cost curves, said the company’s Minerals Americas head. The fact that low-cost lithium deposits tend to come from brine in places like Chile and Argentina is another deterrent for the Melbourne-based miner, which has committed to minimising the use of continental water in drought-hit Chile. “We recognise that at the moment there’s short-term supply-demand conversations,” Ragnar Udd said in an interview. “How that plays out over the next 20 or 30 years, I don’t think it will last.” Bloomberg
‘Fake’ Aluminum Stocks Put Perils of China’s Commodities Funding in Spotlight Analysis by Bloomberg News | Bloomberg June 5, 2022 https://www.bloomberg.com/news/arti...a-once-again-draws-scrutiny?srnd=premium-asia Piles of aluminum ingots at a stockyard in Wuxi, Jiangsu province, China, on Thursday, Sept. 30, 2021. China’s energy crunch spans at least 20 provinces and has had a mixed impact on the base metals market, as supply disruptions have helped underpin a rally in aluminum. Photographer: Qilai Shen/Bloomberg (Bloomberg) The opaque world of funding commodities trading in China is again under the spotlight. This time, metals markets are fixated on an incident in the southern province of Guangdong, in which several traders claim they were duped into providing credit against fictitious quantities of aluminum. More than 500 million yuan ($75 million) may have been loaned, backed by stockpiles of the metal stored in a warehouse in the city of Foshan that turned out to be worth significantly less than that. The amounts being talked about are relatively small, certainly in the context of the aluminum market in China. The world’s biggest producer churned out over $100 billion of the lightweight metal last year, for everything from window frames to car parts. But what’s spooked traders is the similarity to a much bigger scandal eight years ago in the northern port city of Qingdao that caused a crisis of confidence in China’s metals markets. What might cause the mismatch in stockpiles? Commodities trading, whether that’s wheat, copper or oil, is typically a high-volume, low margin business. To optimize cash flow, traders often pledge their assets for loans. In the metals industry, that collateral takes the form of warehouse warrants, which record details like the quantity, quality, ownership and location of the goods. Fabricating multiple warrants for a single stockpile of metals would allow the owner to access loans from more than one lender, a practice sometimes referred to as “over-pledging.” A mismatch between receipts and the actual quantity of metal could happen under such procedure. Why would a trader take that risk? Traders running on already razor-thin margins have been operating under even tougher financing conditions in recent months. Banks have become more cautious on lending because of bigger price swings caused by the Russian invasion of Ukraine, as well as jitters over some high profile losses in the nickel market. That’s encouraged some to seek alternative financing, including the practice where smaller, privately owned firms pledge their goods to larger, state-run traders to obtain cash. Commodities prices are also generally higher due to the war in Ukraine, which means that inventories may be worth more as a currency for making other investments. The risk now is that larger traders aren’t going to lend to their smaller peers if they don’t have confidence that their loans are secured by valid warehouse warrants. How was the potential foul uncovered? That market volatility may have jangled creditors’ nerves. The sharp drop in aluminum prices after the latest virus outbreak locked down the entire city of Shanghai led some to try and take hold of the pledged metal, fearful that borrowers wouldn’t be able to repay their loans. That was when the mismatch between too many warrants and not enough aluminum became apparent, according to people familiar with the matter, who declined to be identified discussing a private matter. What happened during the Qingdao scandal? The Foshan incident is relatively small beer and so far involves just traders. At Qingdao, it was banks, including international institutions, that ended up with the biggest exposure to a merchant and its affiliates who pledged the same metals stockpile multiple times to obtain loans of more than 20 billion yuan. But that in itself is probably instructive. Banks have learned the lessons of Qingdao and other commodities financing scandals, making them more cautious lenders and driving traders to seek other arrangements, including borrowing from larger peers. China’s regulator also urged banks to strengthen oversight, and the use of metals as collateral for financing has diminished since then. Other similar frauds outside China include French and Australian banks getting hit by loan losses in 2017 that totaled over $300 million, after they discovered fake documents for nickel stored in Asian warehouses owned by Access World, a subsidiary of Glencore Plc. And in 2020, Singaporean oil trader Hin Leong (Pte) Ltd. forged documents to win trade financing for products it had already sold. What are the potential outcomes? The local police in Guangdong are investigating and will determine whether fraud occurred but because the warrants in question weren’t registered with the Shanghai Futures Exchange, China’s biggest commodities bourse won’t be on the hook for examining the regulatory angles to the case. Instead, the creditors will probably go after the warehouses first for the inventories, while waiting for investigations to decide if the borrowers are accountable for the losses. The incident has led to a domino effect whereby more warehouses in China have suspended operations to check on-site metal inventories, according to people with knowledge of the information. Although the Chinese government and its state banks are preparing to expand lending to counter the ill-effects of the virus on the economy, their largess is unlikely to extend to commodities trading. As such, smaller outfits may find it harder to get financing in the wake of another scandal. The incident is having a baleful effect on prices, as well. Aluminum has dropped in the days since news of the possible fraud started circulating, and traders will continue to be wary of buying metal while such uncertainty around ownership persists. There’s also the risk that confidence will be sapped in other important markets for materials that rely on warehouse warrants, like copper, nickel or zinc.
LME hit by $450mn lawsuit from Elliott Management over nickel market chaos https://timetotimes.com/lme-hit-by-450mn-lawsuit-from-elliott-management-over-nickel-market-chaos/ 20 minutes ago. American hedge fund Elliott Management is suing the London Metal Exchange for more than $456 million over its decision to cancel nickel trading in March following an unprecedented surge in the metal’s price. Elliott filed suit against LME and LME Clear, the exchange’s clearing house, on June 1 in the High Court of England via two vehicles, LME owner Hong Kong Exchanges and Clearing said on Monday. The lawsuit by the Florida-based group, founded by billionaire Paul Singer, alleges that the cancellation of the nickel contract trading on March 8 was “unlawful in terms of public law and/or constituted a violation of the human rights of the plaintiffs.” HKEX said the LME would “strongly” contest the claim and considered it “unfounded”. Elliott’s lawsuit stems from the 145-year-old exchange’s decision to cancel one-day trading in nickel and suspend trading for eight days in March. “Elliott believes that when the LME canceled the nickel trade on March 8, 2022, it acted illegally because it exceeded its authority to cancel this trade or used the authority it had in an unreasonable and irrational manner,” the hedge fund said. That will exacerbate the exchange’s problems as it fights to reclaim its reputation as the world’s leading trading platform for industrial metals, including nickel used to make stainless steel and electric vehicle batteries. The decision to suspend trading follows a 250% spike in the price of nickel to a record $100,000 a ton, triggered by a short squeeze as banks and brokers rushed to close part of a massive position amassed by Xiang Guanda, the billionaire founder of China’s leading stainless steel maker Tsingshan Holding group. Nickel is currently trading at over $28,000 per ton. The LME’s decision to cancel the trading day due to a price spike that it claims has pushed several smaller exchange members to the brink of bankruptcy caused an uproar among some traders who saw their profits wiped out by the move. AQR Capital Management, one of the world’s largest hedge funds, is exploring legal options in its dispute, people familiar with the matter said in March. The founder of the fund accused the LME of “cancelling deals to save your favorite friends and rob your non-friend clients.” The LME denied that parent company HKEX influenced its decision. The move also prompted UK financial regulators in April to begin scrutiny of a “chaotic market” in nickel contracts during the period. LME CEO Matthew Chamberlain backed away from a decision to leave for digital asset startup Komainu in April as the exchange struggled to rebuild its reputation. He also launched a review of the chaos in the nickel market. The LME said that one of the reasons it had not previously responded to the drop in nickel prices was that it did not know how many transactions were taking place over the counter through derivatives. Chamberlain is trying to push through a plan for more regular reporting of these items across all physical LME metals. However, members have resisted such moves in the past for greater transparency. The exchange also said in March that it would almost double the size of a fund that protects the market as a whole from the sudden collapse of one of its participants.