Nickel Rush Restarts As Steel And Battery Demand Rises

China’s rapid exit from its Covid-19 lockdown has triggered the restart of a rush for nickel, an old-fashioned metal mainly used in making stainless steel, but also a key ingredient in the batteries of electric vehicles.

While not yet attracting the eye of investors in the same way iron ore has with its 30% rise to $100 a ton there has been a strong flow of deals and a hint of stockpiling ahead of a possible nickel shortage.

Over the past two months the price of nickel has risen by 15%, admittedly off a pandemic low of $5 a pound to $5.75, potentially heading back to $8/lb, where it was last October.

Not A Boom, Yet

No-one is yet talking about a higher target, the return to a time in 2007 when nickel was fetching more than $20/lb, but the there is growing confidence that nickel is heading back into boom conditions.

Hints of something significant brewing in nickel can be found in the growing number of deals in the metal, especially a high-risk move by a small Australian mining company to buy the big but troubled Goro project on the Pacific island of New Caledonia.

At the same time as the sale of Goro made waves in the commodities world an investment bank detected anomalies in the Chinese nickel market in what looks to be a repeat of events last October when there were signs of an attempt to corner the nickel market.

Back then, speculators were very active in nickel because of a belief that demand from battery makers could quickly match demand from stainless steel makers, an event postponed thanks to a collapse in electric vehicle (EV) demand.

The latest developments in nickel indicate that the rush to build a position ahead of an EV revival is underway, with EV demand a key factor in BHP Group, the world’s biggest miner, retaining an interest in nickel after several years of trying to sell its Australian nickel assets.

Stockpiles Building

Macquarie Bank noted earlier this week an unusual development in nickel and other industrial metals which indicated a “non-reported” build up of stockpiles which pointed to demand running ahead of consumption.

One possible result of an excessive build up in stocks is a future price fall, unless consumption catches up.

An alternative view explored last week by Macquarie is that Chinese steel and battery markers are concerned about a future shortfall developing in nickel supply, especially from major suppliers such as Indonesia which has banned the export of unprocessed nickel ore.

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