Could Soaring Nickel Prices Disrupt The EV Boom?

The nickel market has been in disarray in recent weeks as prices soared to unprecedented levels before going on a freefall amid supply concerns and an unexpected short-squeeze by one of the world’s largest steelmakers.

Nickel is one of the most common metal elements in the world used to make stainless steel, batteries, coins, and other metal applications.

How the Russia-Ukraine Conflict Drove Nickel Prices Higher

Russia is one of the world’s largest nickel producers, supplying about 20% of class 1 nickel that is mainly used in the production of stainless steel and electric vehicle batteries. Data from market research firm Statista showed that Russia was the world’s leading exporter of nickel and nickel products in 2020, shipping about $3.02 billion worth of the commodity.

The conflict between Russia and Ukraine sparked fears of a nickel supply crunch. Russia has been hit with several economic sanctions, and importers of other Russian commodities like oil are trying to avoid being impacted by sanctions.

The Short-Squeeze That Sent Prices Skyrocketing

In addition to the supply concerns induced by the ongoing Ukraine conflict, a short-squeeze involving Tsingshan Holding Group, touted as the largest nickel producer in the world was also behind soaring nickel prices.

The Chinese company took a nickel short position of 200,000 tons of nickel on the London Metal Exchange (LME). As the nickel price surged in the early days of the Ukraine crisis, the company’s short position was left in disarray, setting it up for a paper loss of about $8 billion.