Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
Nickel price surged to the highest in a decade on Wednesday as investors bet automakers will have to scramble to secure supplies for their electric vehicle batteries as inventories dwindle.
Nickel was the top performer among industrial metals, which also rallied as worries eased about economic growth in top metals consumer China.
Three-month nickel on the London Metal Exchange jumped as much as 4.4% to $22,745 a tonne, the highest since August 2011. It had pared gains to $22,610 by 1130 GMT, up 3.7%.
[Click here for an interactive chart of nickel prices]
“The battery king nickel has been the initial driver, breaking above that $21,000 level, gapping higher, and now the rally is filtering through to copper and the others,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
“The focus in China is moving away from worries about the property sector slowdown to increased signs that they are going to provide stimulus and support to the economy, some of which will benefit industrial metals.”
In China, nickel prices leapt to a record high, with the February contract on the Shanghai Futures Exchange ending daytime trading 3.8% higher at 162,340 yuan ($25,510) a tonne.
A Singapore-based trader said that inventories were running low partly due to restocking by Chinese stainless steel mills.
Nickel stocks in LME warehouses have halved over the past five months to 99,462 tonnes, their lowest levels since December 2019, while refined nickel inventories in ShFE warehouses held close to a record low of 4,455 tonnes hit in August 2021.
LME cash nickel was at a premium of $192 a tonne over the three-month contract, its highest since October 2019, indicating tight nearby supplies.
Analysts at Goldman Sachs forecast the nickel market to be in a 30,000 tonne deficit in 2022, up from their August forecast of a 13,000 tonne deficit.
($1 = 6.3639 yuan)
(By Eileen Soreng; Editing by Shounak Dasgupta and Mark Potter)
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