Nickel Warehouse Stocks Plummet

[AGgressive Metal]

I wonder what is going on?

[68Camaro]

I don't know - can you get the five or ten years before that to see what the longer trend looks like?

[natsb88]

ni-lme.png (16.02 KiB) Viewed 2056 times

[68Camaro]

It seems the better question may be why was nickel being stockpiled for a number of years but not before, and maybe it is returning to a longer term norm. Someone here recently posted that some new nickel mining regions outside the historical norm are now being exploited - so maybe some of the long term holders think they need to liquidate before the market is flooded?

[AGgressive Metal]

The expansion of non-Western nickel sources is pretty old news though, Indonesia and Philippines are the #1 and #2 producers and those mines take decades to fully develop. I admit I hadn't seen the 30 year chart! So it looks like stockpiles ran up *after* the big price spike and lagged a few years after the decline - or maybe in part helped cause the decline. Your guess is as good as mine.

Some are now saying there is a shortage - but people also say that about silver - however I think industrial metal analysts are a little more objective and less motivated by ideology & anti-fiat like some precious metals guys are

https://www.reuters.com/article/metals- ... SL8N1TS57T

[Recyclersteve]

Keep something else in mind about nickel... There are two types:

1) High quality/purity stuff that comes from places such as Canada and Russia (think places that are very cold);
2) Lower quality stuff that comes from warmer weather places such as Indonesia and the Philippines.

My understanding is that for certain applications (i.e., battery power for a Tesla), they need the higher purity stuff.

I can see that some day the LME (London Metal Exchange) will have two prices for nickel and be forced to segregate the lower purity stuff from the higher purity. I have no idea what the mechanics behind doing this are or how involved the process would be. Maybe the purging of inventory is to get new inventory that is segregated properly?

Also, and this is total speculation on my part. All it takes is one or two so-called experts to come out with some convincing data showing that the amount of high quality nickel produced is much lower than the quantity of garden variety nickel. And if a company like, say, Tesla, comes out and says they are having a hard time getting what they need and have started to stockpile it, look out. Of course don't expect the experts to talk highly about nickel until they have accumulated a sizable position for themselves. Even though I like Canadian .999 nickels a lot, I don't have enough that I own to be rich- even if it went up 10 or 20-fold.

I wonder if Kyle Bass, the guy who famously bought $1 million dollars in U.S. nickels several years back, is quietly taking a position in .999 Canadian nickels. Another thing that those who follow the stock market closely could look for is a company buying out a nickel producer at a big premium to the current stock price. One thing potentially tricky here is trying to figure out how much of current production (dollar volume not pounds produced) is nickel (vs. other base and precious metals by the same miner). If only 1% of a company's production is high purity nickel, that isn't enough to move the needle in my humble opinion.

Also, be wary of hidden agendas. For instance, someone talks up high purity nickel. After the price starts to move sharply higher, someone else comes in and talks it down. Why? Because they are shorting nickel in the futures markets and want to push it down hard. They figure they can best do this with people who briefly had huge profits just before a sizable decline. The short seller could short it first and then buy to cover their short and go long near the bottom. In other words, they feel they can create a short-term panic. With the big increase in trading volume that accompanies a panic, they will be able to get out of their short position and initiate a new long position. After all, they feel that high purity nickel is a good long-term investment. They were too late to buy it the first time so they shorted it after a big run, covered the short profitably near the bottom and bought again to create a new position.

I would think that even if a big price increase for high purity nickel occurred, it wouldn't do much for the value of U.S. nickels, since they are only 25% nickel in composition. But with the Canadian nickels from 1981 and before being 99.9% nickel (with the exception of some dates in the 1940's and 1950's), there could be quite a surge in price for them. Also, being produced in one of the cold weather countries associated with higher quality nickel would likely make things even better for .999 nickels from Canada.

It is way too hard to predict with any degree of certainty what will happen, but for those with a time horizon of, say, 2-10 years (total guess on my part), this could be a fairly low risk investment. If I had a portfolio worth $5-10 million, I wouldn't be gun-shy about putting $100-200k into .999 nickels. Some obstacles to doing this would be:

1) Trying to get a decent quantity without moving the price too much (it is NOT a big market and is susceptible to manipulation).
2) Where would you put it all? I remember calculating that Kyle Bass' $1 million face in U.S. nickels weighs well over 200,000 pounds. I would say that $150k of .999 nickels costing an average of 10 cents each would mean a holding of 1.5 million Canadian nickels. With a pound having 100 nickels, this means that many nickels would weigh about 15,000 pounds. Many would struggle to come up with space to store that many nickels.
3) If you were in a panic and had to sell the nickels quickly, any buyer would know they likely have little competition. You would have to be a patient seller to get a decent price, even if you had a nice paper profit.

Please do your own due diligence (research) on this before committing any hard earned capital. Good luck to all.