Written By The global nickel market has been no stranger to turbulence and instability in recent years. From fluctuating demand and supply to the emergence of new players disrupting traditional trade routes, the industry has faced numerous challenges that have left many scratching their heads. However, amidst all this chaos, there is a glimmer of hope as LME’s nickel market starts to show signs of recovery. In this blog post, we’ll take a closer look at how the nickel market is bouncing back from crisis and what it means for producers, traders, and investors alike. So buckle up as we explore the fascinating world of nickel commodities!
Background on the LME Nickel Market
The London Metal Exchange (LME) is the world’s primary metals exchange. The LME was founded in 1919 and operates under the auspices of the British government. The LME is responsible for the trading of nearly all types of metals, including nickel.
Prior to 2007, nickel prices were highly volatile and often went up and down rapidly. This instability was due to a variety of factors, including increases in demand from China and other developing countries, an increase in supply as a result of mining operations in Russia and other countries, and competition between buyers and sellers.
In 2007, however, the LME implemented a new trading system that stabilized prices. This system allowed buyers and sellers to agree on a price before exchanging metal. As a result, nickel prices became more stable and remained that way until late 2013 when they began to decline again.
In early 2014, the LME implemented another new trading system that helped to stabilize prices once again. This system allows buyers and sellers to trade metal at preset prices rather than exchanging it immediately. By stabilizing prices and preventing them from going too high or too low, this new system has helped to restore some of the stability that had been lost over the past few years.
The Resolution of the Crisis
Since hitting a low of $9,000 per metric ton in early 2016, nickel prices have slowly recovered, climbing to around $15,000 by the end of 2017. In March 2018, LME’s nickel market posted its first monthly gain since February 2016 and is currently trading at $18,700 per metric ton.
The reasons for the market’s recovery are manifold but can be broken down into three main categories:
– Supply and demand fundamentals have stabilized
– Niue has resumed exports and this has helped to reduce global inventory levels
– new investors have entered the market with more confidence
The Future of the LME Nickel Market
The nickel market is back on track and expected to grow in the coming years. The market has seen a steady recovery since bottoming out in 2016, reversing a trend that had been ongoing since the late 2000s. The LME Nickel Index has rebounded by more than 50% from its low point, reaching a new all-time high in March 2018.
The main drivers of this recovery are twofold: increased production and demand for nickel. In 2017, global production of nickel increased by 2%, led by increases in China and Peru. This increase was mainly due to new mines being brought online, as well as expansions at existing mines. In addition, demand for nickel is growing despite stagnant economic growth rates around the world. This growth is mainly attributable to electric vehicles and other high-growth industries such as batteries.
Looking forward, the LME Nickel Index is expected to grow at a rate of approximately 5% per year over the next five years. This reflects both an increase in production and demand for nickel, as well as an expanding economy worldwide which will require more metals resources.
Conclusion
The global nickel market has been through a lot in the past year or so. Falling commodity prices, low demand from the electric vehicle (EV) industry, and increasedproduction by major nickel miners all contributed to the crisis. However, as we can see now, markets have responded decisively to restore order and stabilize prices. This includes a rebound in LME nickel prices and tightened spreads among producers. In this article we provide an overview of how LME nickel prices recovered and what this means for investors.
