Nickel Chaos Resounds From Stainless Steel to EVs!

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Podcast – Nickel Chaos Resounds From Stainless Steel to Electric Vehicles
  • 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.

It’s like an iceberg; you have the best tradeable stuff above the surface, but there’s a much more material beneath that priced off it. And you can’t transfer these units onto the London Metal Exchange to relieve a squeeze; they’re simply passengers on the car.

explained Peter Hannah, Senior Manager of Pricing Development at Fastmarkets in Singapore.

The impact was felt quickly in China, which has the world’s largest stainless steel and electric car battery businesses.

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.

Currently, due to the volatility of nickel pricing, it’s unclear if automakers have the confidence to create their business models based on nickel-rich batteries. If the price of nickel can be erratic today, imagine how erratic it would be in the future, when there is a clear expectation of a deficit.

added Susan Zou, Energy Metals Analyst at Rystad Energy.
The Nickel Price Has Gone Up To More Than 100%
The Nickel Price Has Gone Up To More Than 100%

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.

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