Batteries aid nickel value, stainless steel reduces it

Subject

Nickel market outlook

Significance

The nickel price has risen by nearly 50% since the start of 2016 but is still worth only around one fifth of its value a decade ago. Trends in physical inventories in Shanghai and London are diverging. China’s refined production fell by 20% in the first three quarters of 2017 and stockpiles in Shanghai halved. In contrast, stock levels at warehouses managed by London Metals Exchange remain higher, covering a quarter of annual demand. Nickel supply and demand are largely in balance but leading commodity traders, including Glencore and Trafigura, warn of an upcoming shortage.

Impacts

• If a substantial shortage develops in the type of nickel crucial for electric vehicles (EVs), prices could rise, raising final EV prices.
• Environmental regulations will tighten, constraining refining additions; Vale and Norilsk are already unable to continue new projects.
• Rising prices for European benchmark ferrochrome nickel will encourage stainless steel producers to focus on nickel-heavy product classes.
• After a nickel receipt forgery at one of Glencore's subsidiaries, authentication procedures will tighten and product delivery will slow.