The price of LME nickel has experienced a dramatic surge, starting from a low of $13,334 on January 9, and reaching as high as $19,786 in recent days. This represents a cumulative increase of over 48%, marking one of the most significant rallies in the metal’s recent history.
As of May 9, the price of Jinchuan Electrolytic Nickel (Big Block) has climbed to 143,000 yuan per ton, reflecting strong demand and supply-side pressures.
Nickel is a metallic element widely used in the production of coins, stainless steel, and various industrial applications, especially in the military sector. It is also known for its ability to prevent rust when plated on other metals. In the global market, nickel is often referred to as "LME nickel," named after the London Metal Exchange — the world's largest non-ferrous metal trading platform. The prices and inventory levels of nickel on the LME have a major impact on the global non-ferrous metal industry.
So why has the price of nickel shot up so sharply? Here are the key factors:
1. **Indonesia's Export Restrictions**: At the start of the year, Indonesia, the world’s largest exporter of laterite nickel ore, imposed stricter controls on nickel ore exports. This move has significantly disrupted the global supply chain, as Indonesia accounts for roughly 20% of the world’s nickel supply. China, which relies heavily on imported nickel — with 99% of its needs met through imports — is particularly affected. A large portion of China’s nickel smelters depend on Indonesian nickel ore, making the country highly vulnerable to these export restrictions.
2. **Geopolitical Tensions**: Ongoing conflicts between Russia and Ukraine have added another layer of uncertainty to the nickel market. Russia is the second-largest producer of nickel globally, and any sanctions targeting its nickel exports could further tighten the market. With both Indonesia and Russia facing supply issues, it's no surprise that the market is on edge.
3. **Jinchuan Group's Price Hikes**: One of China’s leading nickel producers, Jinchuan Group, has been aggressively raising its nickel prices. In early May, the company increased the ex-factory price of electrolytic nickel in Shanghai by 2,500 yuan/ton, reaching 127,800 yuan/ton. Earlier in April, they had already raised prices by 8,000 yuan/ton, setting a record for the largest single-day increase since 2011. Industry observers have called this move “crazy,†highlighting the aggressive strategy being taken by major players.
4. **Production Disruptions**: A key factor behind today’s surge is the suspension of operations at Vale’s Goro nickel mine in New Caledonia due to environmental spills. This disruption has heightened concerns about nickel supply, pushing prices higher.
5. **Speculative Activity**: Reports suggest that large-scale speculation and hoarding have played a role in the price surge. In parts of Zhejiang, nickel has become a hot commodity, with some investors treating it like gold. According to an official from the China Storage Nickel Warehouse, there has been a significant buildup of nickel stocks, with one day seeing 12,000 tons stored — equivalent to 20% of the warehouse’s inventory. This kind of speculative behavior isn't new; similar patterns were observed during the 2009 financial crisis.
6. **Market Outlook**: Analysts from Southwest Securities believe that despite current consolidation between 120,000 and 130,000 yuan/ton, the domestic nickel price remains relatively low. With smelting costs now exceeding spot prices, the outlook for nickel is positive. If the 130,000 yuan/ton level is broken, the price could potentially rise above 180,000 yuan/ton in the near term.
In summary, a combination of supply constraints, geopolitical tensions, and speculative activity has driven the nickel price to historic highs, signaling a tight market that is likely to remain volatile in the coming months.
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