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Spot nickel premiums recede to 10-year low

Keywords: Tags  nickel premiums, melting nickel, plating nickel, nickel demand, LME warehouse, Chicago warehouse, Detroit warehouse, LME nickel Chicago

NEW YORK — Melting-grade nickel spot premiums have fallen to their lowest level in more than a decade as an influx of nickel into London Metal Exchange-approved warehouses in Chicago has exacerbated concerns over lackluster demand and domestic oversupply.

AMM’s melting-grade nickel premiums have dropped to between 15 and 25 cents per pound, down from a narrower 18- to 25-cent-per-pound range that had previously held unchanged since mid-January. The current premium range represents the lowest levels recorded since February 2003, when U.S. spot premiums were as low as 14 cents per pound.

The lower premiums come at a time when already-languishing consumer demand has fallen even further, sources said.

"We have less nickel business. It’s 30 to 40 percent lower than last week," a nickel trader said. "Maybe the demand is lower because of Passover and Easter."

"Things seem to have slowed the last two to three weeks," a second trader agreed. "People have told us they’re not as busy."

One consumer, who reported buying spot material this week at a premium of 15 cents per pound, said that contract business was continuing to cover most nickel users’ requirements, meaning spot business is unlikely to pick up until the second half of 2013.

"With the production rates at the mills, they’re probably using what they anticipated, and production hasn’t ramped up to a point where they’re going to need to buy more," he said. "Maybe that’s a reason for premiums being down a little more, with people getting aggressive to move material."

The lower demand levels have been reflected in a recent arrival of nickel stocks in LME-approved warehouses, traditionally considered the market of last resort.

More than 1,000 tonnes of nickel have arrived at Chicago warehouses in recent weeks, reflecting "oversupply across the board," a third trader noted.

While there was no nickel in Chicago LME-approved locations as recently as March 14, deliveries have been mounting for the past two weeks, with LME-approved warehouses in the Midwest city holding 1,008 tonnes of nickel as of March 26 in addition to Detroit’s 402 tonnes.

But now that it’s in the warehouses, that metal could take some time to make its way back out into the physical marketplace, which could help keep premiums from falling further still, a fourth trader said.

"It’s still taking forever to get metal out of LME warehouses. If anything, that’s propping the premiums up," he said.

Meanwhile, plating-grade premiums were unchanged in a range of 50 to 60 cents per pound this week.

Three-month nickel ended the LME’s official session March 28 at $16,700 per tonne ($7.58 per pound), down 2.2 percent from $17,080 per tonne ($7.75 per pound) March 14.

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