Below is an interesting podcast by Crux investor regarding the LME situation and Nickel outlook.
Main point to take away is that the Fundamental remains - Demand exceeds supply - Simple
The current events in the World, Russia / Ukraine and LME suspension have brought the nickel shortage to the world's attention.
Nickel shortage and price squeeze is no surprise to those researching and investing in battery minerals.
Podcast description:
Nickel hit touched $100,000 overnight.
LME trading was suspended.
Increased more overnight than the prior price high in off-LME pricing.
Have extended periods for people to settle trades and margin calls – market stories suggest that is Tsingshan / big boss personally short nickel and getting squeezed.
Still not sure we took out inflation-adjusted pre-LME price of $8/lb in 1968 ($54 / today)
Driver in last 24 hours was short squeeze – was the same phenomena that took price up the final 20% to $54K that we hit in 2007.
Didn’t call this this quickly.
Didn’t think anybody crazy enough to go this short nickel given the EV and stainless growth that we’ve seen in the market.
How did we get To $100,000 ?
Fundamentally, Nickel long-term demand growth of 4-5% annually always underestimated by analysts.
Period of underinvestment and few new nickel discoveries – large companies which owned non-Indo production allocated capital during prior decade to other metals and we’ve seen non Indonesian production shrinking each year for 5-6 years.
Supply can’t come on quickly in west Back in first show in 2019, highlighted the 2 Canadian projects that will just replace supply – spending $1 billion and $1.4 billion and got started building in 2018 and won’t come on until 2023.
One of big new higher grade discoveries, Nova Bollinger, looks like will close by 2026 or so (and was only discovered in 2012) and started production in 2016.
Demand surge – nickel demand grew by 15% last year driven by more than 100% growth in EVs and double-digit demand growth from stainless steel.
Inventories already at near-record levels in days of consumption - Only 80kt of nickel on exchanges – less than 2 weeks at current levels.
Russia just brought geopolitical risk in nickel to forefront and mismatch between kind of nickel market needs (low carbon, higher purity) and nickel supply (high carbon). 60% of nickel already China and Indonesia.
Rest of world only 40% and Russia one-quarter of that.
Will solve the nickel market form balance in next 12-18 months (can’t fix the carbon problem without projects like Canada Nickel), but this just further emphasizes geopolitical supply chain risk.
Sanctioned nickel will still find a way to market but will probably add 2-3 months.
That’s 40-60 kt of nickel vanishing into inventory. If every nickel consumer now nervous of supply and adds 1-2 weeks of inventory – that’s 60-120kt of nickel vanishing into inventory.
Where do we go from here?
Will be face-ripping volatility.
Will get big aftershocks (prices moving $10,000 tonne in a day up and down and even bigger intraday ranges.
Nickel will trade anywhere from between $30K and $100K in price – likely most of time between $34 and $60K for next period of time.
PAN Price at posting:
30.0¢ Sentiment: Buy Disclosure: Held
(20min delay)