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Nickel prices jump amid sanctions and lower-than-expected production

posted onJune 4, 2018
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Nickel is likely to do well this year as the silvery white metal has outdone its 2017 performance, having surged 21 percent on the London Metal Exchange and 31 percent on the Multi Commodity Exchange of India in the first five months of 2018 itself.

The rally in Nickel prices came after the U.S. Treasury on April 6 issued new sanctions on Russian entities and individuals, including aluminum giant Rusal which is responsible for 7% of the world’s aluminum production. The sanctions on Rusal has already lifted prices for aluminum to their highest in more than six years.

This sparked fears that sanctions could extend to the world's second-biggest nickel producer Norilsk Nickel, which produces over 90% of Russia's nickel, 58% of copper, over 80% of cobalt and almost 100% of the platinum-group metals and pushed average Nickel prices to $14426.7 per tonne highest since late 2014, on the LME and MCX respectively. Rusal holds a 25 per cent stake in Norilsk.

Nickel is “falling prey to the Rusal syndrome,” Malcolm Freeman, founder of brokerage Kingdom Futures, told The Financial Times.  

“ Nickel is spiking by more than 10 percent on worries that a furtherance of Russian sanctions will hit Norilsk Nickel” Peter Boockvar, chief investment officer at Bleakley Financial Group LLC, told Bloomberg.

Nickel

Analysts also say that electric vehicle boom will boost Nickel prices further, as the metal  is used to make stainless steel and batteries for electric cars. 

“We lift our nickel price for 2018-19 ... due to better stainless steel demand recently and the potential that the market is willing to bring forward electric vehicle demand into the price,” Reuters quoted UBS strategist Daniel Morgan as saying. 

In April, investment bank UBS predicted electric vehicle battery manufacturing could drive incremental nickel demand up by as much as 40 per cent by 2025. 

The nickel market was also boosted by lower-than-expected production by Brazilian mining giant Vale, the world's largest producer of nickel. The company produced 58,600 tonnes of finished nickel in the first quarter of 2018, down 17.9% from Q1 2017. 

Leading international agencies like the World Bank and the IMF have predicted that 2018 is likely to be nickel's year as nickel inventories decline and nickel prices finally start to rise.  

The World Bank in its commodity forecast report estimated that the average spot price for nickel will grow slightly further in 2018 to $10,559 per metric ton from $10,100 in 2017. Over the next decade, the price will grow to $18,000 per metric ton.

The IMF's report revealed a similar expected rise from $9,227 per metric ton in fourth quarter 2017 to $9,438 in 2018 and growth to $9,557 in 2019.

So far nickel, has been shining the brightest amongst base metals. And its future looks even brighter.