Nickel Comes Back to $ 20,000 As Traders Turn to Fundamentals

The price of nickel has rebounded to $ 20,000 as trading is still moderate with the London Metal Exchange shutting down for the Christmas holidays and base metals markets have been keeping a close watch on the spread of the Covid-19 Omicron variant.

The benchmark nickel futures contract on the London Metal Exchange closed 0.12% at $ 20,045 per metric tonne on Christmas Eve, after fluctuating between $ 19,240 and $ 19,950 over the two last few weeks. The LME is closed until Tuesday.

Prospects for increased supply as an energy crisis eases in China have allowed smelters to ramp up production and the Chinese group Tsingshan, which started producing nickel in Indonesia, held down the price of nickel not far from its one-month low in mid-November, according to economic data supplier, Trading Economics.

Slow demand, low stocks

On the demand side, demand for stainless steel and nickel sulfate is expected to be weak, according to Shanghai Metal Market in its Monday note. Nickel sulfate is the key ingredient in producing cathodes for lithium-ion batteries.

However, low inventory in warehouses at the LME and Shanghai Future Exchange supported the price.

The Global Palladium Fund has estimated that the global nickel market will experience a surplus of 59 kilotons (KT) in 2022, from a likely deficit of 150 KT this year.

Surplus market

The surplus will be concentrated in low-grade nickel pig iron (NPI) and will be highly dependent on an expected increase in supply from Indonesia, specialist physical metals supplier Exchange Traded Commodities (ETC) said in an email last week.

A surplus would be a particularly welcome outcome for stainless steel makers, who depend on nickel for production, as well as for manufacturers of electric vehicle batteries, although this requires higher quality nickel for which supply prospects are less certain, the company said.

“Next year will really be a two-nickel story, as for high quality nickel the situation looks more balanced, with less prospect of increasing supply in the short term and the likelihood of a growing deficit at as demand for electric vehicle batteries in particular increases, ”said Timothy Harvey, Business Development Manager for the Global Palladium Fund.

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Read more: Better commodity investments: will demand continue in 2022?

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