Nickel prices have surged and caused serious damage to the global nickel market and related upstream and downstream industries, the China Nonferrous Metals Industry Association said, following an unprecedented rise in global nickel futures at the London Metal Exchange (LME). In just two days on March 7 and 8, the LME nickel futures surged 174%, followed by the rare announcement that all nickel trading on the 8th would be canceled and not resumed before March 11. The current nickel price has seriously deviated from the fundamentals and lost its guiding significance for spot prices, the Association said, pledging to ensure the supply of bulk commodities, and closely following the industry's operating situation.
The nickel price fluctuation came amid widening Western sanctions against Russia, such as excluding Russian banks from the SWIFT international payments system. Given that Russia's nickel ore accounts for 11% of the global supply, and its pure nickel accounts for 20%, the impact is not surprising, analysts said. Nickel is a key raw material for the production of stainless steel and new energy batteries, with the latter being an important item in countries embracing green development, especially China, where new energy vehicles have become a pillar industry for low-carbon transformation. The Shanghai Futures Exchange suspended trading in some nickel contracts for a day starting from the evening trading session on March 9, in response to speculation after the global price fluctuations.
Analysts said that upstream companies are less willing to take new orders, while downstream industry participants are looking at contingency measures to cope with potential supply shortages and price rises. Tesla China's official website said that the prices of the Model 3 high-performance version and the Model Y long-range and high-performance version had gone up by about CNY10,000. The current domestic Model Y high-performance version uses ternary lithium batteries, which contain nickel-cobalt and other precious metals. While there has been no confirmation about whether there is any direct connection between the Tesla price rise and that of nickel, analysts believe the nickel price jump could be a factor.
Regarding the rising costs of raw materials, Contemporary Amperex Technology, a major supplier of batteries for Tesla, said that the rise in upstream raw material prices has put pressure on the cost side and they are actively expanding the industrial chain while strengthening the cooperation with upstream and downstream partners. Domestic nickel inventories are low, at around 10,000 tons, Wang Yanqing, Industry Analyst with China Futures, told the Global Times, noting that they could run out in less than a month if the situation doesn't change. In 2021, Indonesia became the world's largest nickel producer, which was the result of a combination of Chinese technology and capital with Indonesian resources. “Indonesia's nickel ore resources are very important to the global supply chain, including the Chinese market, given its rich resources and effective cost control in mining and transportation,” Gu Fengda, Analyst with Guosen Futures, told the Global Times.
