|
|
The world’s market for nickel is in chaos, leaving manufacturers that need to search out new sources.
Supplies from Russia, which historically have provided more than 11 percent of the metal to manufacturers around the world, have not been banned but are in jeopardy because of its Ukraine war.
Earlier this month, a foul-up in nickel trades on the London Metal Exchange shut down trading in the metal for a week after prices doubled in less than a day to more than $100,000 a ton.
Historically, nickel’s price has ranged from $10,000 to $15,000 per ton, topping $20,000 for the first time this year.
On 8 March, Tsingshan Holdings, the world’s largest producer of the metal, faced billions of dollars in margin calls as nickel prices shot up, leaving the company to cover billions of dollars’ worth of short positions—bets that the price would fall.
To make good its losses, Tsingshan began buying nickel at a frenzied pace, driving prices skyward and sparking other traders into panic buying before the price rose even more, as we reported in “London Metal Exchange Suspends Trading in Nickel” (15 Mar 2021).
The exchange shut down trading in nickel as some companies saw soaring prices threaten their existence, halted the turmoil, and canceled trades that had taken place during the panic, leaving many traders bereft of profits they had made under exchange rules.
The market tried to restart trading last week but nickel’s plunging price triggered additional halts.
“The market is broken,” Keith Wildie, chief trader at metals firm Romco lamented to The New York Times.
Nickel’s price fell the exchange’s 15-percent limit-down on 21 March, closing at $31,380 per metric ton.
On 22 March, nickel traded within the London exchange’s limits, with more than 7,500 contracts traded before noon, more than the combined volume of aluminum, copper, and zinc.
Analysts expect nickel’s price to fall further.
“The trend would be to come down to a level close to where we last left off,” around $25,000 a ton, analyst and nickel specialist Adrian Gardner at Wood McKenzie, told the NYT.
There is enough nickel already in inventories to last for some weeks, the NYT said.
Manufacturers will continue to produce nickel-bearing products, using supplies on hand and recycled metal. Vehicle makers will speed their development of battery designs that use less or no nickel.
However, the typical electric vehicle battery pack contains about 80 pounds of nickel. March’s price surge would add as much as $1,750 to the vehicle’s cost of production, according to calculations by trading firm Cantor Fitzgerald.
As a result of nickel’s recent misadventures, Volkswagen – which needs nickel to build electric vehicle engines and batteries, among a variety of other uses—is exploring the prospect of buying the metal directly from mining companies instead of refiners.
“Raw materials are going to be an issue for years to come,” Markus Duesmann, chair of VW’s Audi division, said in a 17 March Financial Times interview.
There are untapped nickel deposits in Canada, Minnesota, and Greenland, where Bluejay Mining is opening a reserve in partnership with a company backed by Jeff Bezos and Bill Gates.
“When you see the geopolitical developments with Ukraine and Russia, it’s even more obvious that there are supply risks with these metals,” Bluejay CEO Bo Stensgaard told the NYT.
However, opening a new mine and bringing its refined ores to market takes years.
For now, automakers, steel producers, and others who depend on steady supplies of nickel will have to contend with shortages and erratic price moves, with consumers ultimately paying the higher cost.
TREND FORECAST: The shortage of materials will continue for years, driving our long-term Top 2022 Trend of companies and national economies striving to become more Self-Sufficient.
In fact, Russia—despite being cut off from much of the global supply chain—with its vast amount of natural and human resources may well exit globalization and strive towards self-sufficiency. Indeed, they have the skills to manufacture what they are purchasing from other nations.