Supply squeeze will send the price of nickel soaring

The ongoing crisis in Ukraine threatens to send the price of nickel higher.

It's been a good year for nickel. After a two-and-a-half-year bear market, the price of the metal a key ingredient for making stainless steel has soared by 50% in 2014, and by 12% in the first two weeks of May alone.

The rally is largely due to "tensions in Ukraine and possible sanctions on Russia [which] raised concerns over the supply of the metal", says Vladimir Zernov on Fool.com. Russian firm Norilsk Nickel is the world's largest producer, so a ban on exports from the country would have a very substantial impact on the market.

The risk of an interruption to Russian supplies comes on top of Indonesia banning the export of nickel ore in January, along with other metal ores such as copper. The government is aiming to move up the commodity value chain by forcing producers to process ore in Indonesia rather than ship it abroad in its raw state.

However, with inadequate smelting capacity in Indonesia and new plants requiring substantial investment, the immediate impact of the ban will merely be to create a shortfall in the global nickel market.

The government claims that up to nine new nickel smelters may be finished this year, but this is widely considered unrealistic.

As a result, analysts at Citigroup expect global nickel supply to be in deficit by more than 130,000 tonnes next year, compared with a small surplus this year. The bank forecasts that prices could hit $30,000 per tonne, from around $20,000 at present.

Recommended

The charts that matter: bond yields turn back up and a new bitcoin record
Global Economy

The charts that matter: bond yields turn back up and a new bitcoin record

Bitcoin hit a new all-time high, while government bond yields turned back up. Here’s how that has affected the charts that matter most to the global e…
23 Oct 2021
Coal makes a comeback
Coal

Coal makes a comeback

The environmental case against coal may be clear, but that hasn't stopped the price rising more than fourfold in the last year.
22 Oct 2021
The charts that matter: bond yields slip while bitcoin tops $60,000
Economy

The charts that matter: bond yields slip while bitcoin tops $60,000

Cryptocurrency bitcoin soared to over $60,000 this week, while government bond yields fell back. Here’s how that has affected the charts that matter m…
16 Oct 2021
Will silver finally realise its potential? I’ve no idea – but I’ve just bought a load
Silver and other precious metals

Will silver finally realise its potential? I’ve no idea – but I’ve just bought a load

For investors, silver is incredibly frustrating. It has more potential than almost any other metal, but that potential is never realised. So why has D…
13 Oct 2021

Most Popular

Properties for sale for around £1m
Houses for sale

Properties for sale for around £1m

From a stone-built farmhouse in the Snowdonia National Park, to a Victorian terraced house close to London’s Regent’s Canal, eight of the best propert…
15 Oct 2021
How to invest as we move to a hydrogen economy
Energy

How to invest as we move to a hydrogen economy

The government has started to roll out its plans for switching us over from fossil fuels to hydrogen and renewable energy. Should investors buy in? St…
8 Oct 2021
How to invest in SMRs – the future of green energy
Energy

How to invest in SMRs – the future of green energy

The UK’s electricity supply needs to be more robust for days when the wind doesn’t blow. We need nuclear power, says Dominic Frisby. And the future of…
6 Oct 2021