While maybe not the most attractive metal market in terms of its appeal, Nickel has a unique reputation in the commodities sector. The metal has had a history of being one of the most volatile industrial metals in the market and ended up proving this to be true on Thursday.
Nickel prices jumped by 13 percent, gaining an extra $2,000 per ton on speculation that Indonesia might be considering a ban on nickel ore exports.
Today’s spike in prices is a continuation of an already existing rally that’s been going on for the past month, fueled by worries that one of the world’s largest nickel producers might be shutting down its exports. While the nation’s mining ministry denied that any policy changes are imminent, which sent prices down somewhat, they still ended the day up significantly.
While few outside the commodities sector would know this, nickel has recently become one of the most actively traded contracts on global futures exchanges as short-term traders are attracted by the possibility of volatile price swings. However, today’s swing in prices marked the biggest daily jump in a decade for the industrial metal, and even veteran traders are astonished by this surge.
“You can see that the market is barely trading now because people just don’t know what to do. It could come off from here, but everyone’s just waiting to see if China comes in and buys it again,” said George Daniel, a hedge fund manager at Red Kite who has been trading in the metals market for almost 30 years. Other analysts have noted that these types of swings aren’t justified on a fundamental basis. “Nickel prices are not set by fundamentals at the moment. The price surge showed that investors tend to believe the Indonesia ore export ban speculation, otherwise how can we explain the spike,” added Celia Wang, an analyst at trading house Grand Flow Resources.
Nickel prices went as high as $16,690 per tonne and ended the day around $16,085. However, there hasn’t been any fundamental reason that justified this price swing. Instead, these volatile swings are explained by “irrationality” as one analyst at Bank of Nova Scotia said in an email. This makes the nickel markets one of the best places for short-term traders looking to make money in the metals sector to play around in.
So far, nickel has been the best-performing metal in 2019 by far, with most other futures contracts falling value since the beginning of the year. The metal has benefited from diminishing global stockpiles, while long-term demand is increasing due to the demand for electric-vehicle batteries.
Indonesia is the world’s top source of nickel, with most of it going to China. As such, analysts and investors around the world pay close attention to policy changes by the Indonesian government. Specifically, the government has said that it will revoke export permits from companies that fail to meet smelter construction targets set out earlier.
Nickel is definitely are metal to watch out for in the future, despite the fact that it doesn’t’ get the same attention from the mainstream financial press that other metals do.
