Nickel Price Hits 1 Year Peak on Deficit Jitters

Base metal nickel skyrocketed to a one year high on Tuesday (July 16) as investor concerns about a potential shortage rose to the fore.

Nickel prices jumped as high as US$14,200 per tonne on the London Metal Exchange during the day before simmering to a close of US$14,090. This was the metal’s highest level since July 5, 2018, when nickel hit US$14,150 before moving on a downward trajectory through the rest of the year.

While supply deficit concerns impacted the nickel space in 2018, sending prices on a rollercoaster ride, growth in areas such as nickel pig iron output have since helped bridge the gap.

Prices cooled through the end of the year and into the beginning of 2019, with supply concerns easing. However, the commodity’s role in the booming electric vehicle (EV) market has kept demand afloat.

A July commodity forecast report from FocusEconomics provides analyst insight on why nickel prices could flex over the foreseeable future.

“Analysts expect nickel prices to rise in the near-term amid backstopped Chinese demand and tapering supply deficits,” the report reads.

“Moreover, concerns of a global economic cool-off persist. Over the longer-term, higher EV-battery output bodes well for demand and should help lift prices through the forecast horizon.”

Although the supply situation surrounding nickel is much less dire than last year, the jitters of another deficit still linger in the market. As companies and investors alike remain keen to hold stakes in the EV revolution, it appears some are looking to get their hands on the base metal while it’s still in stock.

“We’ve been hearing about consistent strong western consumer buying as the main driver of the price, probably related to EV nickel hedging requirements,” Nicholas Snowdon, metals analyst at Deutsche Bank (NYSE:DB), told Reuters.

“The balance has softened from a sizeable deficit to close to balance. But it’s not a sudden swing back to significant surplus and ample availability, so I think there’s still a concern over making sure that you have enough raw materials.”

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.