Liberum Capital said nickel prices should have been around half of the level they closed at when the London Metal Exchange (LME) suspended trading last week.
The LME was forced to suspend trading of the metal, used in stainless steel and batteries, on March 8 after prices spiked at a record high of more than US$100,000 a tonne the previous day, before closing at around US$48,000.
The LME later explained that the contract’s suspension was in response to “disorderly” trading and that the price did not reflect the underlying market conditions.
Commodity prices have risen since Russia invaded Ukraine.
“But even with this extraordinary macro-backdrop, there was something very odd about the LME nickel’s 3x-spike to >U$100k/t,” Liberum said in a research note, adding that trade/industry feedback over the past week suggested that the price spike reflected short-covering by one player, Mr. Xiang Guangda.
Liberum used the nickel/aluminium price ratio, which was strongly correlated this year before nickel’s spike, to help determine its short-term price estimate.
“Applying spot’s ratio to nickel/aluminium prices reported over the past week allows us to ‘correct’ nickel’s prices since March 7,” it said.
Using the ratio, it estimated the spot nickel price for March 11 of US$25,772 a tonne and the three-month contract at US$26,074 a tonne.
“These are about half the levels reported by the market on March 7,” it said.