LONDON: Nickel prices surged to their highest since 2011 on Friday as a supply deficit ate into stockpiles and investors looked ahead to rising demand from electric vehicles.
Benchmark nickel on the London Metal Exchange (LME) was up 1% at $22,400 a tonne in official trading after peaking at $22,935. It is up about 8% this week.
Prices have doubled since March 2020 but are well short of a record high of $51,800 reached in 2007.
Nickel is mostly used to make stainless steel. Batteries account for 5% of demand, but that could rise to 30% by 2040, said WisdomTree analyst Nitesh Shah.
“There is a broad realisation of just how important nickel is in the energy transition. It’s very, very difficult to see how supply of class 1 nickel (used for batteries) can keep up with demand,” he said.
“We’re very bullish. $25,000 is not where it’s going to stop. We can go much higher than that over the next decade.”
INVENTORIES: On-warrant nickel inventories in LME-registered warehouses have fallen to 44,832 tonnes, the lowest since 2019 and down from more than 200,000 tonnes in April.
Stocks in Shanghai Futures Exchange (ShFE) warehouses are close to record lows at 4,711 tonnes. One London trader said that Chinese buyers were “hoovering up” LME metal.
SPREAD: In a sign that supply is tightening, the premium for cash nickel over the three-month contract jumped to $318 per tonne, by far its highest since 2009.
SUPPLY: The International Nickel Study Group (INSG) last year predicted a surplus in 2022 after a deficit in 2021. That increase in supply is likely to sap momentum from nickel prices.
INDONESIA: Top producer Indonesia is considering an export tax on some nickel products, Bloomberg reported this week.
PRICES: LME copper was down 0.8% at $9,880 a tonne, aluminium was 0.9% higher at $2,978, zinc fell 0.5% to $3,545, lead rose 0.5% to $2,369 and tin was down 0.2% at $40,450.