Nickel … Now Worth a Lot More Than a Nickel!

The London Metal Exchange’s, LME, front month nickel contract surged 15% on Wednesday to hit its upper trading limit, reversing direction and climbing for the first time since trading resumed last week.

LME nickel gained 5.5% at the open and hovered at stronger levels for the first few hours of trade, but spiked by nearly $3,000 during just about 20 minutes. It hit its upper limit of $32,380 a ton and was up 14.3% at $32,195 by 11 a.m. GMT, having recorded almost 2,700 traded lots.

Nickel is an essential unsubstitutable metal. It resists corrosion under various extreme weather conditions, so is used not only in automobiles and home appliances such as electric ovens, but also it is of a constant heavy demand from military equipment producers. A copper-nickel alloy is commonly used in desalination plants, which convert seawater into fresh water. Nickel steel is used for armour plating. Other alloys of nickel are used in boat propeller shafts and turbine blades.

Russia is one of the world’s largest producers of nickel. When the geopolitical clash happened, fear of supply disruptions sent the price of nickel galloping, so much so that on March 8, and on several occasions later, the London Metal Exchange was forced to suspend nickel trading. The LME, owned by Hong Kong Exchanges and Clearing, suspended nickel trading on March 8 after prices spiked by more than 50% to over $100,000 a ton.

Thereafter, on March 23, LME said second ring session in nickel was declared a disrupted session and all agreed trades during that session were null and void – something unthinkable before!

At the time, prices for the metal had surged some 250% in just over 24 hours. Nickel trading has since resumed, with prices now in free fall. What happened to the price of nickel is called a short squeeze.

LME volumes have picked up since Tuesday, suggesting the market was hoping to return to normal after two weeks of deep disruption and turmoil. The world’s top nickel trading platform withstood a record price surge, a 6-day trading suspension, and then a restart hit by technical issues.

Many prominent metal analysts expect further rise of nickel price towards $50,000 per ton amid elevated volatility.