Nickel Prices: A Volatile Market

Nickel is an important metal in the stainless steel sector. It is estimated by The Nickel Institute that a full three-quarters of global stainless steel production is accounted for by grades that contain the element. Many factors affect the market price for nickel: currently, that price is experiencing what have been referred to as 'wild swings'.

The cost of high-purity nickel destined to be delivered within three months under London Metal Exchange (LME) contracts dropped steeply last week, falling by 15% to just £21,322 per tonne by Friday 18th November. Paradoxically, this followed a steady rise in price of as high as 20% in the preceding five days, which peaked at £26,426 per tonne. The LME has been described as facing a 'long road ahead' as it seeks to regain confidence in its global trading benchmark for nickel. 

The volatile market conditions show how the 'nickel squeeze' which took place in mark is still affecting the LME. During the squeeze, the cost of nickel on the exchange hit in excess of £84,494 per tonne, with massive margin calls threatening to engulf smaller-sized brokers. 

The Chief Executive of the LME, Mathhew Chamberlain, reacted by suspending nickel trading for one week in addition to cancelling over eight hours of nickel trades, a move which caused uproar among traders. Since the squeeze, trading volumes for nickel at the LME have been in steep decline as traders have reduced their activities: this reduced market has been blamed for exacerbating the dramatic moves in the nickel price.

Attempting to stabilise the current volatility, the LME began a process of 'enhanced monitoring' of the trading activities of participants in the nickel market. The exchange also raised initial margins for nickel trades to £5,154, a rise of 28%. Nickel prices reached the 15% daily trading limit of the LME, which was introduced to 'damp down sharp moves'.

According to various metal strategists, a further factor adding to the chaotic price changes of nickel is the currently-low level of inventory. Commerzbank reported that the LME's nickel stocks recently dropped below 50,000 tonnes, marking a 14-year low.

The demand for nickel continues to grow, driven in large part by the growth in the production and use of electric vehicles, the batteries of which require large amounts of the metal to function. Advisory group RFC Ambrian predicted that, by 2030, the demand for nickel is expected to rise to as much as 4.8m tonnes a year.

Throughout the constant changes in the price of nickel, BS Stainless pledges to continue providing stainless steel materials and components at the most competitive cost to our discerning customers. To find out more about the role of nickel in stainless steel production, please browse the BS Stainless website.