Nickel prices reach 12-month high on shrinking supplies

Nickel prices

As commodities across the board continue to see a surge in prices, one particular industrial metal has reached a new record. Nickel prices rose on Thursday, reaching a 12-month high thanks to dwindling supplies as well as a growing group of bullish speculators that expect the price to go up further in the future.

Nickel Prices

Nickel is already one of the best-performing commodities in 2019, having risen by 39 percent since the beginning of the year. Prices for Nickel futures on the London Metal Exchange rose by 3.5 percent to $14,955 a metric ton on Thursday, which would represent the highest price seen since June 2018. It marks the 12th consecutive positive day for the industrial metal as analysts continue to rise throughout the rest of the year.

Supplies of nickel have continued to fall as disruptions at nickel smelters as well as landslides in Indonesia, which is one of the largest producers of the ore globally. Inventories of the metal on the London Metal Exchange have reached the lowest point seen in over six years, dwindling down to 149,000 tonnes.

“The large drop in inventory over such a short period of time is material and speculative buyers have been buying backing higher future prices. Bottom line, nickel has gone bullish after doing very little over the last 12 months,” said Michael Rodrigeuz, executive general manager at Jervois Mining in an interview about the nickel market. “Having said that, low interest rates, changing consumer sentiment and the ongoing trade war between China and the US looks like it’s going to drag well into next year.”

However, supply issues aren’t the only factor that has been pushing up prices. Investors around the world are betting that nickel demand will continue to go up as electric-vehicle adoption rises and the need for batteries grows. While it’s not certain how much this recent bull trend has been arterially created due to these speculations, it’s significant enough that, should the market shift for any reason, prices could see a dramatic reversal similar to what happened with palladium prices earlier this year.

One of those factors that could cause such a shift comes back to Indonesia and if shipments from the country stabilize in the upcoming weeks. TD Securities analysts went on to say that this “could be a catalyst for prices to correct somewhat after this impressive rally.”

Another factor could be a possible increase in available supplies for sale, as higher prices could draw out alternative inventories of nickel that are not tracked by exchanges. On the Shanghai Futures Exchange, for example, nickel supplies have recently hit a 17-month high at 25,800 tonnes. Moving such quantities of nickel, however, are both costly and take time, so prices would have to rise significantly to encourage such a migration from differing exchanges.

Most analysts expected that nickel wouldn’t have a particularly impressive year, with Goldman Sachs going on record to state they didn’t see prices going above $12,500 per tonne. So far, the industrial metal has completely outpaced expectations and as deficits are likely to continue, prices have no where else to go but up.