Nickel Chaos Resounds From Stainless Steel to Electric Vehicles

The London Metal Exchange’s suspension of nickel trading after soaring prices left brokers facing huge margin calls has also upended the market for a key industrial commodity.

Nickel is a key ingredient in stainless steel and electric-vehicle batteries, and the LME sets benchmark prices for the global industry. But in recent years many consumers have come to favor other raw materials over the refined metal that underpins the bourse’s contracts, leaving them as largely passive observers of this week’s market meltdown.

“It’s like an iceberg, you’ve got the top trade-able above the surface, but there’s a whole lot of material beneath that pricing off it,” said Peter Hannah a commodities price development manager at Fastmarkets in Singapore. “And you can’t get those units onto the LME to ease a squeeze, they’re just passengers on the vehicle.” 

China, which has world’s biggest stainless steel and electric-vehicle battery industries, felt the impact immediately.

Chinese producers of nickel sulfate -- used in EV batteries -- stopped offering product due to the lack of price visibility, said Susan Zou, an analyst at Rystad Energy in Shanghai. That’s raising concerns about a physical metal market that’s expected to tighten as EVs displace the combustion engine.

“Right now, given the volatility of nickel prices, whether the automakers still have confidence to develop their nickel rich battery driven business models is in question,” said Zou. “If the nickel price can be chaotic today, maybe it can also be in the future, when there’s a definite deficit forecast.”