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May 2017 | Base Metals


Nickel: Adopting our low-case scenario


At the half-way point of Q2 we take stock of what the surprise event of the quarter – the departure of Regina Lopez from the position of Philippine environmental secretary – has done to the short-term price outlook. Prices have slipped to our previous low-case scenario, which now becomes our base case. Our previous base case is now our high-case scenario, but it would take some bullish surprises – and some more meaningful short-covering rallies – to get back there now.

An all too brief taste of short-covering There was a short-covering rally last week. Three-month price rose from $8980/tonne to $9,365/tonne as open interest fell from 242,015 lots to 231,270 lots – a 4.3% price increase at the same time as a 4.4% decrease in open interest. But by the end of the week the short-covering petered out and doesn’t seem to be present so far this week as prices are trading around $9,100/tonne at the time of writing. There was no clear trigger for short-covering last week, but if a major catalyst does emerge to prompt a meaningful and sustained period of covering, we could see prices above $10,000/tonne again. The speculative short position is certainly large enough to...

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