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Nickel hit its upward limit for the second day in a row, sending prices back above US$37,000/t, in a sign the volatility that prompted the nickel market to conk out earlier this month is in no way over.
The stainless steel and EV battery ingredient has been on strict daily limits since the market reopened late last week.
It was shut a little over two weeks ago after prices doubled from already record highs to more than US$100,000/t in a couple hours of trade on March 8.
The driving force behind the price shock was a cocktail of low stockpiles, supply fears over Russian production post the invasion of Ukraine and a large short position held by Chinese stainless steel producer Tsingshan, which prompted an almost unprecedented short squeeze.
Tsingshan has received support from bankers and other nickel miners to close out some of its short position, but still has some on the market.
Commbank mining analyst Vivek Dhar says while that’s the case obscene volatility in nickel prices will remain, with only a small portion of its short position reduced.
“The daily price limits on LME nickel trading have reduced price volatility for now,” he said.
“However, it’s clear that a number of mining, energy and agricultural commodities have faced a significant increase in price volatility on perceived and actual supply disruptions following Russia’s invasion of Ukraine.
“Margin calls have surged in turn, forcing traders to reduce activity. Liquidity is further reduced, leading to a vicious cycle of more price volatility. Nickel prices on the LME are likely to remain volatile so long as Tsingshan’s large short position is held.”
Should higher prices stay, Dhar says it could influence battery and EV makers’ decision on whether to shift to nickel-free battery chemistries like lithium-iron-phosphate.
Nickel rich chemistries are desirable because have longer range, but Dhar said any 20% increase in nickel prices beyond US$26,000/t would imply a 3% lift in nickel-manganese-cobalt battery packs.
“The EV sector is trying to boost nickel intensity in batteries because that results in higher energy density and additional mileage,” he said.
“It’s still unclear where nickel prices will settle by the end of the year. But the price escalation already may encourage the EV sector to shift towards nickel‑free battery chemistries.”
IGO (ASX:IGO) shares climbed 3.4% to an all time high of $13.68 today, giving the nickel, lithium and copper miner a market cap of $10.35 billion.
Gold miners were also in positive territory after prices rose to US$1960/oz on geopolitical instability.
Newcrest Mining (ASX:NCM) was up 3.46% to $26.90 a share, 10.25% above its closing price on December 31.
Northern Star (ASX:NST) shares gained 2.08% while AngloGold Ashanti (ASX:AGG) stock rose 2.34%.
Coal miners and lithium stocks were also in strong positive territory among the mid caps with Sayona (ASX:SYA), Coronado (ASX:CRN), Allkem (ASX:AKE) and gold and lithium junior Firefinch (ASX:FFX) all in strong positive territory as the overall materials sector lifted 1.29%.
AngloGold boss Alberto Calderon has been on a tour of Australia, where the company produces in excess of 500,000ozpa via its shares of the Tropicana and Sunrise Dam gold mines in WA.
The former Orica boss has delivered a major turnaround in the South African gold giant’s share price since taking over in 2021. He delivered a talk at the Melbourne Mining Club this week stating the case for gold’s role in a society focused on reducing industrial carbon emissions.
He said gold miners produced just 78Mt of carbon emissions against 177Mt for Bitcoin and Ethereum combined.
“Contrary to conventional wisdom, including gold in a multi-asset portfolio actually reduces the portfolio’s carbon footprint,” he said.
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