5

Nickel with no new impulses. Trade war discussions without results. LME nickel warehouse stocks falling continuously. However, suggestions around about relocations.

5

LME Management would prefer higher stock levels, and in summer want to make some proposals. Perhaps the warehouse reforms of 2016 went too far. Consultations are underway.

5

LME contract for nickel sulphate (for battery production) not on the short term agenda. The existing LME nickel future is a suitable instrument for hedging battery nickel and stainless steel scrap.

5

Parties and media in Germany in a frenzy. Blogger really stirs things up. Nothing to do with journalism. It is legitimate to express opinions even if they reach a big audience of course.

In the last few weeks nickel, on the London Metal Exchange (LME), could not find new impulses, despite warehouse stocks falling continually. After talks in Washington did not produce any constructive results, the trade war between the USA and China remains ongoing. A new level in the escalation was reached when serious threats were made by both sides. And since there was hardly anything positive to report, prices on the nickel futures LME market levelled off for the first time below the USD 12,000.00/mt mark.

The exchange warehouse stocks do not, however, give the full picture in order to be able to make a proper judgement about market supply. This is also seen indirectly from the various proposals which the LME wants to make known in the summer, in order to try to bring more nickel back into LME accredited warehouses. Low warehouse stocks also mean less income for the warehouse operating companies.

Pertinent to this, the Vice President Sales of the LME, Alberto Xodo, at an international nickel conference in Amsterdam, said that consultations had been made with the market about the warehouse reform introduced in 2016, in order to see whether this had gone too far. It could actually be that the stocks, along with the additional demand from the battery sector, had been moved to non-regulated warehouses. Quite clearly, the conditions offered by the LME warehouses are not particularly attractive.

At the nickel conference this representative of the LME, Xodo, went on to say that the Exchange does not plan the introduction of a nickel sulphate contract at this time, since the existing nickel future would be sufficiently effective as a hedging instrument for the battery industry. This, of course, also applies to the nickel content of stainless steel scrap. In today’s day and age, it would be totally irresponsible not to hedge. The price risk in the nickel content of scrap can be more than adequately hedged via an LME nickel futures contract, as there is a natural and factual correlation between primary and secondary nickel.

Xodo, thereby, was also indirectly confirming that prices for all nickel products, whether on or off exchange, are all connected economically. Unfortunately however, there is often the feeling that some ideas, which are in definite contradiction to every micro and macroeconomic awareness, must first be pushed back and forth through a revolving door before they can finally be dismissed as unworkable. But then this is how it is.

With the trade war dominating market activities at the moment, even if warehouse stock reductions do not seem to be enough to give nickel prices a push, nothing has happened to alter the facts. Accordingly, the International Nickel Study Group (INSG), in its regular publication on supply and demand figures, expects the excess in demand for 2019 to be 84,000 tons. Already since 2016 there has been a considerable annual supply deficit, which – as well as relocations of stocks into non visible areas – is responsible for the continuing stock reductions.

Whilst analysts of the Investment Bank Macquarie only estimate an amount of 57,000 tons, they have, however, already taken into account the highest growth rate and production figures for nickel pig iron (NPI) production. It is especially interesting here that J.P.Morgan has just reported that floods in Sulawesi (Indonesia) have been impeding the loading of nickel ore in the harbours and local production since the beginning of June.

In the meantime, politics in Germany are in no-man’s land, or, as financial analysts would say, in uncharted territory. Nearly everyone seems to be over tasked by the situation. And this is not because in neighbouring Austria the coalition of the Chancellor Sebastian Kurz, has, surprisingly and very quickly, come to an end, and in such a way no one was anticipating. The right populist coalition partner had shown themselves as something only to be ashamed about.

Rather, it was a blogger, under the name of Rezo, with a Youtube video about the destruction of the CDU (and also a little about the SPD) which has ignited discussions in politics and media in such a way never dreamed of before. In the end, many of the reactions clearly show just how many less eloquently spoken people there are. And how important it is for the media to gain publicity. For example, freedom of press was debated even though the contribution was more or less the personal opinion of a video idol much loved by children and teenagers.

And even if other bloggers conferred with this posting and opinion, it had nothing in common with a press release made after journalistic research which should or must satisfy some expectations, but of course certainly did not. Just as the actions of the former national football player Özil, who takes every private and semi-public opportunity to be photographed with the flawless democrat, the Turkish President Erdogan, would not be described as journalistic work.

Nowadays, however, Rezo and also Özil, with their actions, have a certain not too inconsiderable public reach, yet at the end are only responsible for themselves. For, contrary to what some elderly people may believe, the younger generation is not so stupid as to have their political opinion or any other opinion immediately changed because of some posting, and then deny the CDU their vote in the European election or think that Erdogan is a great man just because Özil shook his hand.

If this writer thinks back to his childhood, among youngsters there has never been much sympathy towards the liberal and conservative camps. To express this in a different way: even quite a few altar boys and chess players leaned towards social democracy or to the left. And even today this has hardly changed, because for young people, other topics are important and they must sometimes find out their political leanings themselves.

This does, of course, not alter the fact that climate change is enormously important for the present and the next generations, but at the same time the world is still so very complex, so a video lasting 55 minutes, even if viewed totally in depth, although unlikely, cannot be enough to shine even the slightest light in the darkness. There are no simple isolated linear solutions, as nice as this would be. In this respect the relative calm on the part of the hyped up Greens is not so surprising. They know only too well from the past how quickly, even with the highest standards, when reality takes hold, failure can loom when becoming part of the government.

The volatility of opinion polls has, in the meantime, become just as high as nickel prices, and overnight a guaranteed chancellor, such as Martin Schulz, can become the biggest loser. And the Greens are afraid of this, as a meteoric rise without making much effort, can also work the opposite way and lead to a quick fall. It is, of course, not new that the party of the Greens stands for climate and environmental protection. And in this day and age, the timing could not be better to more or less take charge of this subject matter.

But there are many things which obviously show that this is not a party of the middle class, but one of left of centre. The election in Bremen is an example of this. It has to be wondered just why wealthy entrepreneurs, such as the tool king Würth, openly make known their support of the Greens. Perhaps intoxicating drinks or pharmaceutical substances played a part here, as there is no logic to be seen since Mr. Würth is not the only one who has children and grandchildren.

But all Germans (and all Europeans) should be thankful that the Green political movement has, in a positive way, crucially influenced political decisions in certain areas, such as environmental policy. Also the so-called political camps have not really changed. Only today the centre left is now represented by the Left party, the SPD and the Greens, and the centre right by the FDP, CDU/CSU and by some of the protest voters of the AfD. The political landscape may have changed, but the basic direction not. Elections are still won in the middle and still influenced by both abstaining and protest voters.

What has changed, however, is that all members of the public want to hear solutions, not slogans, from politicians, especially about subjects which can no longer apply to just one camp: climate change, digitalisation, speed, health, immigration, migration and homeland. The recent success of the social democrats in Denmark has shown that voters cannot be pushed in one or the other convenient ideological direction, but that they have their own opinions and concerns which politicians have to take seriously, or at least show they do. And, voters are also allowed to change their opinions. If there is a need to convince, then this is best with effective arguments and facts. And an exchange of views.

Only it is unfortunately the case that such communication or discussion today takes place neither in the media nor any other place. In the end, everyone has an opinion and someone who thinks differently is first and foremost an idiot who should be ignored. This is really terrible, because things can only change with serious and respectful arguments, not with a dogmatic grip on the same position. Beyond that, it can only be advised to, on the whole, remain quiet, for what will happen will just happen, but at least better than thought.

And this description of German politics also seems to apply to the American President. At least if the capital market strategist, Martin Lück of BlackRock, the biggest private asset manager worldwide, is to be believed.  He spoke to the Frankfurt Allgemeine newspaper about his opinions and they were published in an article on 8th June 2019 which is a read to be recommended. Lück sees matters in the following way: In his opinion, at the moment, there is nothing moving the markets more than the trade war between the two biggest economies of the world, China and America.

Of course, this is not just about the balance of trade deficit, but at the core it is about strategic rivalry and rights to scarce resources. That Donald Trump seems to think that he can reduce the deficit through import tariffs on Chinese products is obviously rubbish, according to Lück. The simple truth is that Americans consume more than they produce themselves and therefore have to hold foreign debt. Therefore, the arguments of Trump are shallow and short-term, and especially so that every American can understand them. Yet he positively expects a quick end to the matter, as he would certainly not want this creating difficulties in his upcoming election campaign for a second term of office. On the contrary, at every event he would like to be able to say that he negotiated the biggest deal ever. At this time, however, it is too early for a solution to the plot.

LME (London Metal Exchange)

LME Official Close (3 month)
June 11, 2019
  Nickel (Ni) Copper (Cu) Aluminium (Al)  
Official Close
3 Mon.Ask

11,880.00
USD/mt

5,916.00
USD/mt
1,784.00
USD/mt
 
LME stocks in mt
  May 13, 2019 June 11, 2019 Delta in mt Delta in %
Nickel (Ni) 169,218 163,878 – 5,340 – 3.16%
Copper (Cu) 203,750 211,225 + 7,475 + 3.67%
Aluminium (Al) 1,261,450 1,096,300 – 165,150 – 13.09%

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