The price of the base metal skyrocketed with a spike that caused the London Metal Exchange to shut down the trading
Nickel is not a precious metal, but investors may have fooled you these days. The price of the base metal has soared in the past 48 hours with a staggering 250% increase, leading the London Metal Exchange (LME) to cease trading on Tuesday.
Why this, and why now?
Nickel’s huge rally caught a little off guard, especially as other commodities like zinc, lead, copper and aluminum settled on modest bumps or even pulled back from the Marlet. But that was perhaps less surprising to someone who witnessed the unfolding of the Russian-Ukrainian conflict, who is also well-informed about the geopolitics of the metal. According to Bloomberg, Russia exports 17% of the world’s prime nickel as the world’s third-largest producer, so of course its regional instability would have rattled the market, this person could have told you. Nickel is also historically the most volatile of the metals. And he is constantly in demand. It’s used to produce the obviously ubiquitous stainless steel and lithium-ion batteries for electric vehicles, which have become trendier than ever as Tesla and its rivals invade the space. Fears of a supply shortage likely have pushed prices skyward, a senior market analyst at Oanda, a foreign exchange firm, told Barron’s. Price action in the nickel market overnight suggests a sense of panic,” said the analyst, who also predicted that the pressure on commodities would last.
The LME canceled trades and suspended trading on Tuesday after the price of nickel first jumped 90% to $55,000 a tonne on Monday, then fell back to a record high of $100,000 the next day, nearly quadrupling the price last friday. News sources called the shutdown the biggest crisis to hit the LME in decades, after nickel made the biggest move in its 145-year history.
The squeeze additionally tightened after China’s Tsingshan Holding Group—one of the world’s nickel and metallic titans, owned via way of means of billionaire Xiang Guangda—which changed into compelled to recoup on a big brief role it were constructing on the grounds that final year, while it guess that fees could drop, Reuters reported. It eventually sold up large chunks of nickel to alleviate its brief bets and keep away from margin calls, sending nickel rates through the roof.
This last detail may explain, in part, why the peak was so exaggerated. (Although Russia also supplies a significant percentage of the world’s aluminum, the metal is far from the buying frenzy and even lost more than 7% on Tuesday.) An ING commodity strategist described the nickel market as “absolutely insane” to Reuters: “Fundamentals alone will not be able to explain these prices”. Another pointed to Tsingshan as a catalyst. “Tsingshan’s big short triggered prices, but we were already in a tight supply situation that was exaggerated by Russian sanctions,” Amalgamated Metal Trading’s chief researcher told Reuters.
Shocking as it may sound, experts have noted that the nickel surge probably won’t hurt your wallet the way an oil surge would, because you’re just not using as much of it. Stainless steel is mainly found in appliances, kitchenware and machinery, which are usually one-time purchases for families. Even the U.fivecent coin, despite its namesake, is an alloy made mostly of copper with only a quarter of nickel. LME warehouses currently store 75,000 tonnes of nickel, which would be the lowest stock on the exchange since 2019.
