Nickel price climbs in thin trading as investors weigh supply risks

Image: LME

Nickel jumped on thin volumes in London, leading metals higher as traders weigh risks to supply arising from the war in Ukraine.

Prices rose as much as 4.2% on the London Metal Exchange, with about 200 lots changing hands in the first hour of trading. Aluminum also rallied, paring Tuesday’s 4.9% loss after Russia signaled it would scale back its military operations in northern Ukraine. 

While the announcement from the Kremlin has raised hopes for a resolution to the conflict, western officials have expressed skepticism about the extent of a potential retreat. U.S. President Joe Biden said he’ll see how Russia acts on a pullback and “see what they have to offer” in further talks with Ukraine.

Metals markets have been roiled by the supply threat resulting from the war, and none more so than nickel. Prices spiked by as much as 250% over two days earlier this month as top producer Tsingshan Holding Group Co. was caught up in an unprecedented short squeeze, with fears over supply from Russia providing the initial spark for the rally. 

The crisis prompted the LME to halt trading for a week and cancel nearly $4 billion worth of trades struck at the highest prices, in a controversial move that’s been followed by a faltering and much derided effort to resume trading.

Volumes have plunged sharply in nickel and other metals on the LME since the reopening, raising doubts about its viability as the benchmark pricing venue for consumers, producers and traders worldwide. Volumes have slumped in other commodities markets too, but traders say the bourse’s handling of the nickel crisis has fueled a much more precipitous drop on the LME. Activity has also declined sharply on the rival Shanghai Futures Exchange during an expanding lockdown in the Chinese capital.

China’s economy is bracing for an even bigger slowdown as fears over the spread of omicron continue to grow. Long-lasting restrictions across the country could push gross domestic product growth toward 4% this year, according to UBS Group AG, well below the government’s target of about 5.5%.

There were further threats to demand in Europe after Germany activated an emergency plan to help the region’s largest economy manage limited energy supplies, as concerns mount that Russia could shut off natural gas deliveries. The first phase involves intensive monitoring of gas consumption and reserves. 

The country’s economy minister urged companies and consumers to help by reducing energy consumption wherever possible. Government officials will also talk to energy suppliers and major consumers to discuss how to prioritize gas use.

Nickel for three-month delivery on the LME rose 2.4% to $32,575 a ton as of 3:14 p.m. in London. All other main LME metals gained, with aluminum up 3.1% and copper up 0.4%.

(By Mark Burton, with assistance from Yvonne Yue Li)


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