Nickel fell to $US12,367 per tonne on Monday, not too far off its March 31 low of $12,339/t, but jumped 3.6% to $12,817.50/t on Tuesday.

Negative sentiment due to the Greek debt crisis weighed on metals overnight, pushing nickel down by 0.7% to $12,725/t.

ANZ Research believes there are four main data points which will point to a nickel deficit – falling Chinese nickel pig iron inventories, increasing Chinese ferronickel imports, higher nickel pig iron prices, and falling LME nickel stocks.

Previously, falling LME stocks had been the only missing piece of the puzzle.

ANZ noted that LME inventories have been consistently falling over the past two weeks, while Chinese refined nickel imports have surged.

“While year-to-date LME inventories are up 12%, they are down 2% over the past two weeks,” ANZ said.

“In fact, LME stocks recorded daily falls over 11 consecutive days – a trend not seen since 2011.”

UBS noted that cancelled warrants were back near record highs.

“The last time cancelled warrants lifted like this was in 2014H1, a precursor to the speculative nickel-price rally of 50% to around $9/lb,” it said.

Chinese imports of refined metal jumped 130% in May to reach the highest monthly volume in nearly four years.

“Some of this may be attributable to the new nickel contract on the Shanghai Futures Exchange (SFE),” ANZ said.

“While the LME contract has over 23 brands that can be delivered against, the SFE contract only has six.

“This raises the issues of a shortage of physical metal in China, which could force warrant holders to look to the international market to source refined metal.”

ANZ believes the nickel price will bounce back to $15,000/t over the next three months.

However, its price forecasts for the next 12 months have been cut due to the recent weakness.

Nickel is now expected to average $15,000/t in the September, down from $17,000/t, and $16,000/t in the December quarter, down from $18,000/t.

ANZ expects the price to rise to $17,000/t in the March 2016 quarter and $18,000/t in the June 2016 quarter.

UBS is forecasting nickel to hit $8.25/lb in the first quarter of next year, equating to more than $18,000/t.

“Our conviction in the magnitude of this price-lift has been waning with the ongoing surge in inventory,” UBS said.

“But these trade flows and other signals in our view demand attention.”