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Nickel Chaos Resounds From Stainless Steel to EVs!
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- The London Metal Exchange controls the price for nickel supply to industry.
- EV manufacturers face challenging questions as a result of price volatility.
The suspension of nickel trading on the London Metal Exchange after surging prices forced brokers to make large margin calls, which also threw the market for a vital industrial commodity into disarray.
Nickel is a significant component of stainless steel and EV batteries, and the LME has determined worldwide benchmark pricing. However, many customers have developed a preference for other raw materials over the refined metal that supports the exchange’s contracts in recent years, making them passive viewers of this week’s market crash.
According to Susan Zou, an analyst at Rystad Energy in Shanghai, Chinese suppliers of nickel sulfate, which is used in EV batteries, have ceased selling the product owing to a lack of pricing transparency. As electric cars displace the combustion engines, this is creating worries about a physical metal market that is likely to tighten.
QuickTake: Who Is the ‘Big Shot’ Behind Nickel’s Bad Short?
Concerns over Russian supply interruptions, along with a massive short bet by Chinese entrepreneur Xiang Guangda, catapulted nickel to a 250 percent increase in only two days. A big gap occurred with Shanghai futures, where maximum daily profits and losses are regulated before London Metal Exchange trading was suspended on Tuesday morning. On Thursday and Friday, prices in Shanghai reduced their advance, but the impact of nickel shortages is felt far beyond China.
On Thursday, Acerinox, a Spanish stainless steel maker, canceled new nickel orders. The corporation stated that soaring prices could not be integrated into the purchasing prices of nickel and scrap and that such hikes may destroy the market.
The nickel market’s underlying complexity is highlighted by the spreading impact. Only so-called Class 1 nickel (with a minimum purity of 99.8%) is covered by the benchmark LME contract, although this accounts for less than a fourth of the total completed supply.
While battery producers employ nickel sulfate, stainless steel makers mostly use nickel pig iron, a less expensive product developed by Guangda’s Tsingshan Holding Group Co. in 2007. Under pressure from rising prices, the Chinese firm devised a method of using nickel pig iron from large Indonesian reserves, resulting in the release of a low-grade alternative.