Is Hayman Capital Management's Kyle Bass About to Get Crushed in Physical Commodities?

Nah.
However, his plan for world domination may be delayed a bit. Here's the story.

Back in October 2011 the news hit the wires (well, the Daily Mail) that, according to Michael Lewis' then-latest book, Boomerang, Mr. Bass had taken delivery on 20 million nickels, $1 million dollars worth.
From the book:

...He still owned stacks of gold and platinum bars that had roughly doubled in value, but he remained on the lookout for hard stores of wealth as a hedge against what he assumed was the coming debasement of fiat currency. Nickels, for instance.

“The value of the metal in a nickel is worth six point eight cents,” he said. “Did you know that?”

I didn’t.

“I just bought a million dollars’ worth of them,” he said, and then, perhaps sensing I couldn’t do the math: “twenty million nickels.”

“You bought twenty million nickels?”

“Uh-huh.”

“How do you buy twenty million nickels?”

“Actually, it’s very difficult,” he said, and then explained that he had to call his bank and talk them into ordering him twenty million nickels. The bank had finally done it, but the Federal Reserve had its own questions. “The Fed apparently called my guy at the bank,” he says. “They asked him, ‘Why do you want all these nickels?’ So he called me and asked, ‘Why do you want all these nickels?’ And I said, ‘I just like nickels.’”

He pulled out a photograph of his nickels and handed it to me. There they were, piled up on giant wooden pallets in a Brink’s vault in downtown Dallas.

“I’m telling you, in the next two years they’ll change the content of the nickel,” he said. “You really ought to call your bank and buy some now.”...

This was the hard asset play of the new millennium. Nickels were all the rage and everybody and his brother put Coinflation.com's melt value calculator in their bookmarks.

Fast forward:
As of this morning the value of a nickel was $0.0519753, down considerably from the number 15 months ago. It looks like the 1909-1982 penny at 241.99% of face is the better investment.

So what's going on?
With the latest, Izabella Kaminska at FT Alphaville:

Preparing for a nickel glut?

FT Alphaville doesn’t tend to follow the nickel market too closely, but the research from Goldman Sachs on Thursday did strike us as interesting (our emphasis):

2012 nickel market summary: Weak demand growth and lower input costs As background, nickel underperformed in 2012, starting the year at $18,910/t, rising to $21,700/t in early February, and finishing the year at $16,998/t, declines of 10.1% and 21.4%, respectively. Overall nickel prices averaged $17,536/t in 2012, down 23.4% yoy from 22,900/t in 2011. Price weakness reflected a combination of soft global consumption growth set against significantly higher low-cost nickel pig iron supply in China, and, importantly, a shift down of the nickel cost curve in 2H2012 (largely reflecting lower energy and nickel ore input prices). LME inventories increased by more than 50,000/t over the year, with most of the increase occurring in Asian LME warehouses. It was also notable that the 2012 surplus came despite significant disruptions to supply at existing facilities and new projects during the year (including at Onça-Puma and Barro Alto in Brazil, and VNC in New Caledonia), and despite the closing of some high-cost nickel pig iron capacity.

Just to recap: that’s an industry surplus. Asian LME inventories chock-full. And relatively supported prices regardless. It all sounds a bit familiar.

But what really stood out was the following chart reflecting LME cancelled warrants:

Meanwhile note the shock-absorber effect on prices as LME stocks grow....MORE (including Goldman's recommendation)

Mr. Bass' hoard may be worth no more than face value for a while. But...

From a Feb. 2012 post "Comments on'Obama wants cheaper pennies and nickels'":

...To be precise, it cost 2.4 cents to make one penny in 2011 and about 11.2 cents for each nickel....

So there is a move afoot to change the alloy.
Plus, nickels have another attribute to commend to your attention:
It's a hell of a lot easier to get change back when buying a loaf of bread with nickels that it is with even the smallest U.S. bullion coin, the 1/10 ounce Gold Eagle, currently changing hands for around $200.00.

Possibly related:
Kyle Bass' Hayman Capital's Doomsday Scenario: Japan
Kyle Bass: "We believe that war is an inevitable consequence of the current global economic situation."