European Nickel Premiums Decline Amid Rising Inventories

European Nickel

European nickel premiums have been steadily declining as the market faces a sharp increase in inventory levels. Producers and traders, holding substantial stocks of nickel cathodes, have slashed prices in an attempt to offload surplus supply. The pressure on premiums is most pronounced for Russian cathodes, while briquettes maintain stronger support due to tighter availability.

One trader highlighted the trend, noting that the past few days have been pivotal. "Premiums are increasingly under pressure, and the conversation across the market revolves around the exceptionally high inventory levels," he said.

Another trader echoed this sentiment, emphasizing that the market is recognizing weak demand fundamentals, which are likely to persist through the end of the year. The high cost of holding large inventories has also contributed to a sell-off as sellers look to reduce their exposure.

Despite the reduced offers, spot activity in Europe remains subdued, and traders are far from hitting their monthly targets for September. The rise in volumes has not been enough to stimulate demand significantly.

However, benchmark nickel prices on the London Metal Exchange (LME) have seen a 2.75% increase over the past week, reaching $16,825 per tonne. This rise is largely due to a short covering program and a cyclical uptick in end-user demand. On-warrant nickel inventories in LME warehouses rose by 5.4% over the same period, with a 19% surge in Rotterdam alone, where stocks now stand at 30,192 tonnes.

The cash-to-three-month nickel spread has remained relatively stable, with the contango widening slightly to $244.50 per tonne, compared to $242.01 per tonne last week.