![]() ![]() Demand for nickel – particularly Class 1 nickel – from non-stainless steel sectors is expected to grow dramatically with maturation of the electric vehicle market. According to CRU, stainless steel demand is expected to grow at an average annual rate of approximately 4% through 2022 with production emanating largely from China and Indonesia. There is market speculation that the physical nickel drawdown is a result of inventory stockpiling by stainless steel producers, in advance of the Indonesian ore export ban taking effect, which will provide further fuel to price volatility over the near-term.ĭemand for nickel continues to be driven by the stainless steel sector. Total inventory levels have decreased significantly in 2019, declining by approximately 49% with the majority of that decline taking place in September. Moreover, nickel inventories on the LME and the Shanghai Futures Exchange (SFE) continue to decline. ![]() These developments suggest an environment of increased nickel price volatility in the near-term. However, since October 1st, nickel prices have softened, mirroring the physical market fundamentals and speculation about LME warehouse levels decreasing without evidence that an increase in demand is supporting the reductions in inventory. Nickel prices reached a high of US$8.45/lb on September 2nd, immediately following confirmation by Indonesian officials that the ore export ban will indeed take effect at the start of 2020. In other words, a confluence of political factors, operational factors, and demand for steel drove the nickel move, not EVs or battery storage. ![]() Price increases were also triggered by continued strong demand from China’s stainless-steel sector, as well as by concerns of a possible shutdown of one of the world’s largest nickel mines as a result of an environmental incident. Higher prices were initially driven by speculation that Indonesia would implement a nickel ore export ban on January 1st, 2020. ![]() Nickel prices on the London Metals Exchange (LME) strengthened through the end of the third quarter and gains continued into LME week, closing up 42% to US$7.97/lb during the third quarter of this year alone. Either way, it is important for investors, consumers and industry players to understand the changing dynamics of these critical electric metals, even when current moves may not be directly driven by factors relating to the adoption of EVs or grid storage batteries. Notwithstanding the demand growth commodities such as nickel, cobalt, lithium and copper are poised to experience as EVs become the norm, some of the early price moves we have seen in commodities such as cobalt, were likely several years ahead of actual demand, or nickel, where factors completely unrelated to the adoption of the electric vehicle have pushed prices higher. This impact is only set to grow in the coming years, likely ending in a bull market for a number of critical commodities. As adoption of electric vehicles (EVs) and battery storage systems continues to accelerate, the technology powering the revolution continues to evolve and its potential impact on the basic materials that the batteries comprise of will impact commodity markets. ![]()
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