Nickel’s story starts the same as copper and zinc, except on steroids.From its 2006 high LME nickel stockpiles fell by over 90% in quick fashion.The result of this pilfering was the equivalent of only about one day worth of global usage.And staying at the 5k-metric-ton level for nearly a year allowed futures traders to have a field day with nickel’s price.

Nickel’s huge risk premium took it past $10 and then $20 for the first time ever.And when LME stockpiles finally commenced a build in 2007, much of this premium was quick to come off.The price of nickel stabilized rounding the corner into 2008 as stockpiles settled around the 50k-metric-ton level.But nickel got sucked into the global commodities correction as 2008 progressed, and its price started to fade even before the stockpiles started to build in the second half of the year.

By the time selling was exhausted, nickel had fallen by a staggering 84%.Like the other base metals LME nickel stockpiles were way up over the course of the panic, and the build didn’t take a breather until April.With stockpile levels stabilizing at this point nickel commenced its recovery, and by August its price had more than doubled.But at this same time in August LME stockpiles changed direction and again mounted a rapid build.But unlike copper and zinc, nickel would heed the call of this fundamental shift.

Nickel traders played the inverse relationship to form and started selling the metal.While the prices of the other base metals continued to rise in parallel with their ongoing stockpile builds, nickel took a different course over the last 5 or so months.As you can see a downtrend has been carved and prices have retreated down to the $8 level.

Interestingly this activity should not be all that surprising given nickel’s stockpile history.LME nickel stockpiles are currently more than double the previous high point since 1998, when the LME started logging daily data.This big nickel oversupply has righteously suppressed its price. Written by Scott Wright of Zeal Intelligence,