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Ardent Listener
16th August 2006, 17:33
Posted: Wed Aug 16, 2006 10:30 pm Post subject: Nickel soars, prompting London exchange to set limits.

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Posted - 08/16/2006 : 17:28:48
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Nickel Soars, Prompting London Exchange to Set Limits (Update1)
Aug. 16 (Bloomberg) -- A shortage of nickel drove prices to the highest since at least 1987, forcing the London Metal Exchange to impose trading restrictions for the first time in a year.
After nickel surpassed $29,000 a metric ton, twice its level at the start of this year, the LME ordered the suspension of rules for delivery of the metal. Inventories have plunged 83 percent in the past year.
``We now have a genuine material shortage,'' Simon Heale, chief executive officer of the exchange, said in an e-mailed statement today, explaining the exchange's decision.
The price of nickel, a metal used to make steel rust- resistant, is four times higher than the average of the 1990s because of a surge in demand from China. The high prices have led to a seven-week, $17 billion battle for Inco Ltd., the world's second-largest producer of the metal.
Nickel for three-month delivery jumped $1,645, or 6 percent, to $29,100 a metric ton in London. Earlier, the contract gained as much as 6.4 percent, the most since January 2004.
The extra cost, or premium, paid for immediate delivery of the metal compared with delivery in three months more than doubled to $3,600 a ton, the highest in at least 11 years. Nickel stored in warehouses tracked by the LME has dropped to 6,162 tons this year, equal to less than two days of global use.
The LME ordered that holders of so-called short positions, or bets that prices will fall, can borrow nickel at no more than $300 a ton each day. The exchange last intervened in metal trading in August last year after hurricane Katrina left stockpiles of zinc stranded in New Orleans, pushing the metal to an eight-year high.
`Something Going on'
``There's certainly something going on and somebody has got large short positions'' in nickel, said Stephen Briggs, an analyst at Societe Generale, one of the 11 companies trading on the floor of the LME. ``It's a very tight market but the physical nickel market is rarely as tight as the LME market suggests.''
Posco, the world's fourth-largest steelmaker by output, said two days ago it had a short nickel position on the LME of ``less than 1,000 tons.'' The company commented after the Wall Street Journal's Asian edition reported it made wrong-way bets involving 10,000 tons of nickel. Posco has been scrambling to cover the positions and is being forced to roll them forward at ever greater expense, the newspaper said, citing unidentified metal market sources in London. The company said rumors of such a large position were ``groundless.''
Nickel producer Inco has been the focus of a takeover battle since June 26, when Phelps Dodge Corp. first bid for the Toronto- based company. Teck Cominco Ltd. and Brazil's Cia. Vale do Rio Doce subsequently made proposals, pushing the offer price to C$19.4 billion ($17.4 billion). Teck today withdrew from the race after failing to sell stock to finance its offer.
``It's looking like there's a trader out there with a fairly large short position,'' David Davidson, a partner and senior analyst at Paradigm Capital in Toronto. ``There's not a lot of sympathy out there for someone buying to cover.''



To contact the reporter on this story:Matthew Craze in London at mcraze@bloomberg.net

oroborean
21st August 2006, 22:31
it makes me sad that there havn't been any replies to this article. maybe i can take heart in knowing that silver is a small market and still largely under the radar, but nah, SLV is too active for that to really be true. maybe no one put together the implications for silver before ted butler's article (http://news.silverseek.com/TedButler/1156198042.php). that the exchange would FACILITATE naked short manipulation by assessing a mere $0.01/oz should be embarrassing front page news. gold and silver "bugs" are constantly being accused of paranoia and an actual DESIRE to see financial armageddon. the fact of the lme nickel contract defaults would be a vindication, showing that markets are not free, but inherently unfair and manipulated. in an insane world, only the mad appear sane.

Ardent Listener
24th August 2006, 20:40
Maybe they just needed you to explain it to them. Thank you.