Modern Mining April 2022

COMMODITIES OUTLOOK

What the ‘beyond unprecedented’ nickel By Gary Peters, director at The Metals Warehouse

We have never seen or experienced anything like what is happen ing with nickel right now. In early March, the situation hit beyond unprecedented levels, with nickel increasing on the London Metal Exchange to a price never seen before, as a result of the war that is taking place in Ukraine. It led to trading being ceased and one of the biggest manufacturers of nickel reportedly recording an $8-billion trading loss.

W ith the future unclear, UK stockholders of products like stainless steel are wondering what will be next and how to react. There is no playbook for this, no previous experi ence to pull on in order to navigate the market that is in turmoil. This article explores what is happening currently with nickel and what this means for businesses should it not be resolved. What is happening to nickel right now? Starting with context, nickel is traded, by the London Metal Exchange, as a commodity on the stock market. The highest price nickel has ever reached before this year was about $50,000 in 2007. That was down to supply and demand. Since the recession of 2008, the price of nickel has ranged between $8,000 and $15,000. With the emergence of the EV market, the price accelerated. It began with Covid, as nickel mines operated with reduced staff and capacities. This caused a huge supply and demand issue, which saw the price of nickel rise to $20,000.

On Wednesday (9 March), the nickel price was artificially reduced to $50,000. On Monday (7 March), it was reported that one of the biggest producers of stainless steel, which also mines its own nickel, Tsingshan Holding Group, had a trading loss of $8 billion. Several banks have been on the end of the same loss and have, as a result, been given a boost to help them get back on track. We have no idea what this means for businesses that buy products with stainless steel in them. The way the price of nickel works in reflection of the price of stainless steel is unbalanced. One of the major mills declares what the sur charge is on stainless steel for the following month and even in a big swing, that price may inflate to £200 per tonne or come down by £200 per tonne. However, based on what happened in March, the price of stainless steel is going to increase by thou sands of pounds in April. As a world market, this is not sustainable. Stainless steel touches multiple industries, includ ing transport, food, refineries, as well as oil and gas to name a few. It touches everything. To put this in context. If you spent £2,000 on stainless steel to refit a kitchen last year, that same stainless steel could now cost in excess of £6,000. We will get to a point where no-one will buy it, things will grind to a halt and major construction bud gets will be thrown out of the window. What does this mean for businesses? There is no playbook for where we are at the

The price of nickel continues to soar.

However, with the threat of the Ukraine invasion looming, that price began to creep up again, moving to $24,000 and then $27,000.

Once the invasion took p l ace and sanc t i ons began to ramp up, the price jumped to $30,000 – as high as it had been since 2007 and a hike no one

thought would hap pen again. On Monday (7 March), it leapt to $51,000. By 6 am on Tuesday (8 March), the price was up to $101,000. At that point, the London Metal Exchange ceased trad ing, reversed all transitions, and

froze trading at $81,000.

22  MODERN MINING  April 2022