With the world's electric vehicle production booming and nickel inventories shrinking, the global nickel spot supply is now showing signs of a rare shortage for more than 10 years – buyers have to pay a huge premium for spot nickel they want to buy immediately, which has attracted the attention of the London Metal Exchange (LME).
On Tuesday, the London Metal Exchange's (LME) nickel spot contract was $90/mt higher than contracts that expired a day later, the highest level since 2010 and close to the high level during the historic price squeeze in 2007.
In response, an LME spokesperson said the exchange had stepped up its surveillance of the nickel market and could take further steps if necessary to ensure that transactions proceeded in an orderly manner.
The latest turmoil in the nickel market is the latest example of a severe supply shortage in the global metal market, and the third time in the past year that LME has said that it will increase its monitoring of related varieties. Over the past few months, the price of copper and tin has also fluctuated violently and even wildly, as the surge in demand and supply bottlenecks during the pandemic have led to a significant reduction in exchange inventories.
On the copper side, the London Metal Exchange was briefly forced to take a number of rare moves to restore normal order in the fourth quarter of last year: including setting limits on copper's most recent maturity spreads and allowing some holders of short positions to avoid delivery.
LME's latest released data shows that since late April last year, LME's nickel inventory has dropped sharply from a high of 264606 tons to the latest 94872 tons, and the last time nickel stocks reached the current extremely low level is back to 2019, when LME launched a market behavior survey after rumors that Tsingshan Holdings moved out a large amount of inventory to cause controversy. At present, the premium of nickel spot contracts is even greater than at that time, indicating that this time buyers are facing more severe pressure.
At the same time as the LME nickel inventory fell sharply, the nickel inventory of the Shanghai Futures Exchange also continued to shrink. According to the data released in the previous issue, the recent Shanghai nickel inventory has fallen for three consecutive weeks, of which the Shanghai nickel inventory decreased by 3.05% to 4711 tons in the week of January 14, and the current inventory is at a historically low level. Reduced inventories pose the risk of simultaneous squeezes in both onshore and international markets.
The LME nickel price was last traded at $22,230 during the Asian session on Wednesday, after hitting a more than a decade-high level of $22,935 on Friday.
Marex analyst Alastair Munro said: "Tension in the Shanghai market has now spread to London, with inventory on both exchanges low and showing no signs of an increase at this time. Essentially, traders and consumers alike were caught off guard, and recent data showed a marked rise in eviction car sales. ”
On Tuesday, the China Passenger Vehicle Association released the latest data on new energy vehicles (NEVs) for December, showing that retail sales increased by 129% year-on-year, and total NEV sales in 2021 increased by 169%. Such strong growth has spurred strong demand from automakers for raw materials for electric vehicle batteries.
The International Energy Agency predicts that if countries implement all the targets of the Paris climate agreement, the world's demand for nickel resources will increase 18-fold by 2040.
Among other major industrial metals, LME tin also hit a record high of $42,345 in intraday on Wednesday as global logistics chaos exacerbated a chronic shortage of tin. At the London Metal Exchange, all six major industrial metals are showing spot premiums, and there are fears that this once-rare synchronous shortage is likely to last longer.
