LME nickel inventories have fallen, although do remain at high levels. They have, however, become more concentrated particular in Johor. This may not be dissimilar to the experience of copper in 2013, with the current low level of copper stocks showing that hoarding doesn't last forever.
Aluminium stocks continue to grow at Vlissengen, although have seen net outflows in Detroit.
The Pacorini/Glencore warehouse operation in Johor in particular has accumulated quite a lot of nickel in the last few months, rising by ~22.5kt since the start of the year. These warehouses have also seen a sharp rise in cancelled warrants, currently accounted for over a quarter of total LME nickel stock.
This rapid expansion and stock and cancelled warrants at Johor is something we have already seen occur in copper. Through 2013, Johor copper stocks rose sharply, with cancelled warrants rising to ~30% of total LME inventories.
But as we have seen in the last 6 months or so, this concentration/hoarding behaviour isn't necessarily a barrier to the withdrawal of metal. Johor copper stocks are now down to just 16kt.
The incentives to move nickel are perhaps a little different to the copper story. It made sense to deliver copper into China given the surge in Shanghai copper premiums in 2H13, which would have provided a tidy return.
For nickel it is probably not just about premiums given the dramatic shift in the outlook for nickel since the ban on Indonesian ore. Given how sharply the nickel price can move on stocking cycles for both raw materials and for stainless steel, some holders of metal are likely to see how high prices can get before delivering.
Total aluminium inventory has been stable, although Vlissingen continues to accumulate more metal since the High Court ruling on the new LME load-out rules.
Detroit, however, hasn't seen any new inflow in the last few weeks and has actually now seen net outflow of metal since July 2013. Perhaps this speaks to the withdrawal of US banks from commodities markets.
The cash-3m contango in aluminium prices has bounced back up a bit more recently, although does remain below the ~2.5% level seen prior to the end of March. This lower level of ~2% still is still very attract rate for finance deals.
