Nickel prices and stocks
Lastly, we will briefly analyse nickel prices and exchange stocks for 2021 and the first months of 2022.
During 2021, the London Metal Exchange (LME) nickel price (close, cash settlement) rose by +25%, from 16,607 USD/t to 20,750 USD/t. The upward move was not constant though – there was a sharp drop at the end of the first quarter (from 19,568 USD/t in 25 February to 15,907 USD/t in 9 March), coinciding with Tsingshan’s announcement of NPI to Matte conversion; and another one in mid-September to early October (20,375 USD/t in 10 September to 17,800 USD/t in 5 October), probably influenced by the news of Evergrande’s credit issues. From the end-October until the end of the year, prices rebounded to levels in a range between 19,000 and just under 21,000 USD/t.
Early in 2022, the nickel price started to increase more rapidly.
At this time, exchange inventory levels were relatively low, there were logistical bottlenecks resulting from the COVID-19 pandemic and a looming conflict between Russia and Ukraine was seen as having the potential to disrupt nickel trade flows. The first news on exchange “squeezes” started to appear in the third week of January.
At the end of February, at the time of the escalation of the Russian-Ukrainian conflict, a noticeable price surge took place, with nickel closing at 25,650 USD/t on 22 February, surpassing 25,000 USD/t for the first time since 2011. The price kept hitting new maxima – by 4 March, LME nickel closed at 28,700 USD/t and the next business day (7 March), there was a significant surge to 42,995 USD/t (the largest ever reported daily increase). During the next morning, prices continued to rise rapidly to an intraday peak above 100,000 USD/t resulting in the LME suspending nickel trading and cancelling trades, on the grounds that the “Nickel market [had] become disorderly” (LME Notice 22/052). News sources reported that the dramatic rise in prices was due to a short squeeze, triggered by a major player reportedly facing difficulties meeting margin requirements. Nickel trading was resumed on 16 March, with newly set price limit changes (5% on 16th March, then 8% on the 17th, 12% on the 18th and 15% on the 21st). These limits led the clearing house to suspend nickel trading on 17, 18, 21, 23 and 24 March. The LME thus reported a price of 30,800 USD/t from 8 to 22 and 35,550 USD/t from 23 to 25 March. After this, the nickel price oscillated between 32,400 and just above 34,100 USD/t, ending April at 32,430 USD/t.
After hovering at over 270,000 t by April 2021, combined LME and Shanghai Futures Exchange (SHFE) stocks started to decline, arguably in response to surging demand from a booming Chinese EV industry in 2021 (although not all nickel removed from exchange reported stocks might have been consumed). Combined inventories decreased at an average pace of nearly 20,000 t per month from May 2021 until January 2022, dominated by LME drawdowns. From February, combined monthly stock declines slowed down significantly. In April, the LME stocks had their first increase (378 t) for a year, but the combined change was still negative at -1,683 t, due to a larger SHFE drawdown. By the end of April, the LME reported stocks of 72,768 t nickel, while the SHFE reported 5,354 t.
In February, the LME reported off-warrant stocks of 2,428 t, a low since the exchange first started to provide this figure in February 2020, and less than one-tenth of the all-time high reached a year before (44,058 t).