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Nickel or Ni (periodic table atomic symbol) is a versatile silver/white metal that is often used as an input in the manufacture of countless secondary products. Listed as number 28 on the periodic table, nickel has exceptional properties including its resistance to corrosion, ferromagnetic (magnetic), ductileness, recyclability, serving as a good conductor of electricity as well as high boiling (2,913 °C) and melting (1,455 °C) points. Some notable uses include the making of coins, steel, reinforcing other materials in the aerospace industry, wiring, alloys and renewable energy.
Nickel is primarily found and extracted in Indonesia, South Africa, Australia, Russia and Canada respectively. These countries combined account for roughly 50% of the worlds nickel supply and should be given the appropriate attention with regard to trading as supply factors as with most commodities, can impact the price of nickel.
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Trading nickel is not limited to physical purchases (bullion) but via multiple avenues where traders can get exposure to price movements. Futures trading on exchanges such as the London Metals Exchange (LME) are commonplace amongst institutions but for the retail trader, Contracts For Difference (CFDs) are a popular choice. CFDs are accessible globally through many brokers offering nickel trading (spot and futures) but it is recommended to understand contract specifications, leverage and broker safety before committing on this route. Covering nickel through the stock market remains as the most widespread method for retail investors with shares such as Vale S.A., Nornickel, Glencore, BHP, Anglo American and South32 topping the list.
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SUPPLY AND DEMAND
As briefly mentioned above, supply and demand constitute a large influence over nickel prices. Economic theory suggests limiting supply drives prices higher and vice versa while the same logic applies to demand (i.e. an increase in demand should lead to higher nickel prices). Global nickel stocks can be monitored on the LME website while Chinese stockpiles also play an important role in nickel price action.
GOVERNMENTS
Governments involved with nickel (import or export) can sway prices by way of government intervention. An example of this was the banning of nickel exports by Indonesia.
GEOPOLITICS
Geopolitical tensions particularly regarding major producers of nickel could significantly move prices. Recently, the Russian invasion of Ukraine disrupted supply chains resulting in a marked increase in the price of Nickel.
CHINA
China is the world’s major consumer of nickel in its various forms, and a slowdown or uptick in the Chinese economy traditionally reflect a positive correlation with the price of nickel. China is arguably the most important demand factor for nickel prices therefore, placing emphasis on Chinese economic and political data is crucial to successful nickel trading.
In actuality, most of the above factors are intertwined and will act in accordance to traditional supply/demand levers making it one of the more important aspects of nickel trading.
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Nickel’s place in the world commodity marketspace is gaining traction in terms of its usability in growing industries. With nickel being prices in U.S. dollars, the commodity also serves as a hedging tool against a weaker greenback coupled with elevated inflation. In addition, when global markets are on the up (bull market), trading nickel can be a great way to capitalize on increased demand as nickel prices are likely to move higher.
Finally, diversifying ones investment portfolio is often encouraged by market experts and nickel can certainly have a place amongst more common investment types such as stocks or bonds.
Nickel prices being so dependent on fundamental drivers, technical strategies are often seen as secondary support for trading decisions which is why it may be wise to employ a more blended approach using both techniques. The below examples look at each strategy in isolation to better emphasize their respective pros and cons.
TECHNICAL TRADING
From a technical trading standpoint, using traditional indicators and price action techniques can be successfully implemented when trading nickel. Because there are an infinite amount of combinations of technical methods, I have selected a simple yet effective method to illustrate the adaptability of technical trading in markets such as nickel which is not traditionally linked with technical analysis.
DAILY NICKEL CHART
Chart prepared by Warren Venketas, IG
The chart above includes a 200-day Simple Moving Average (SMA) in grey along with the Relative Strength Index (RSI). Using the SMA as a reference for directional bias (above SMA = bullish; below SMA = bearish), we can utilize the SMA in this case as a support zone for possible long positioning highlighted by the grey boxes. A move below the SMA will ultimately invalidate the move and sound risk management will be required to avoid any adverse price action. Should the market move in the desired route (upwards in this case), the RSI can then be used to close by correlating price with an overbought indication (blue). This simple strategy is just one such technical avenue that may be practiced in the nickel market.
FUNDAMENTAL TRADING AND THE NICKEL SHORT SQUEEZE OF 2022
If we look at the nickel chart since 2015, nickel has been somewhat rangebound between the $10000 – $20000 levels. In early 2022, when Russia invaded Ukraine the price of nickel started to push higher as a disruption in Russian nickel exports impacted supply-side factors. With a major producer being largely taken off the global register, supply concerns piled on and continued to drive up the price of nickel. In conjunction with the invasion, a massive short position was placed by a Chinese trader (Xiang Guangda, Tsingshan Holding Group Co). It is still uncertain as to whether this positioning was purely for hedging purposes (offsetting any losses from falling nickel prices from the physical commodity) or simply speculative reasons but the result was catastrophic for nickel markets. What followed was a short squeeze causing nickel prices to surpass $100000 per ton (see graphic below) triggering the LME to halt nickel trading!
250% NICKEL PRICE APPRECIATION IN JUST OVER 24HRS
Source: Bloomberg
DAILY NICKEL CHART
Chart prepared by Warren Venketas, IG
Monitoring fundamental drivers, be it supply disruptions from the world’s largest producers or staying in touch with demand-side constituents like China can go a long way in making rational decisions on the future of nickel prices. Fundamentals can be used in conjunction with technical analysis but generally fundamental drivers point to longer-term outlooks and do not lend themselves to short-term strategies.
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Commodity markets often have mutual economic stimuli so keeping up to date with the latest news outside of nickel can aid nickel traders in creating an overall global picture. Some markets to consider include copper and crude oil who often act as a barometer for global growth. For those who are interested in commodity trading education, the DailyFX commodities segment contains everything you need to know about the foundation and basics of commodities markets.
On this page, you’ll learn about the main uses of nickel, how and where it’s produced, nickel’s main price drivers, and some expert opinions on nickel as a commodity.
Interested in how nickel is traded? See our full guide, or if you want to get started trading right now, here are options available in to consider:
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Between 74-89% of retail investor accounts lose money when trading CFDs.
What Is Nickel?
Nickel is a solid, lustrous, silvery-white metallic element that is strong, ductile, magnetic and resistant to corrosion. It also has a high melting point and catalytic properties.
Nickel’s favorable traits make it one of the most widely used industrial metals on earth.
Why is Nickel Valuable?
By the late 1800s, iron and steel manufacturers discovered they could strengthen traditional steel by creating alloys with nickel.
Discovery of new ore deposits in the early 20th century combined with strong demand for steel during World War I and World War II ushered in the modern nickel production industry.
Today mines worldwide extract more than 2.25 million tons of nickel annually.
In addition, recycling efforts account for additional supplies of the metal.
Over 300,000 products in the consumer, industrial, military, transport, aerospace, marine and architectural sectors use nickel. As a result, nickel has become an essential commodity in world markets.
How Is Nickel Produced?
The supply of nickel derives from two sources: primary production (mining) and secondary production (recycling).
Mining provides most of the supply, although the United States Geological Survey (USGS) estimates the quantity recovered from recycling in the United States represented 43% of total consumption.
The Philippines is the largest nickel mining country in the world. However, no single country dominates in production of the metal. Mining takes place in a variety of geographies and countries:
These are the reserves of each country as reported by the USGS:
RankFlagCountryThousands of Metric Tons #1Philippines500,000 #2Russia256,000 #3Canada255,000 #4Australia206,000 #5New Caledonia205,000 #6Indonesia168,500 #7Brazil142,000 #8China90,000 #9Guatemala58,600 #10Cuba56,000Nickel derives primarily ore mining, more specifically, from two types of ores, sulfidic and lateritic. Each type has specific characteristics related to how it is mined:
Processing the ores and separating nickel from them also varies depending on the ore type.
Although sulfidic ores are more expensive to mine, separating the nickel from these ores is cheaper than extracting nickel from lateritic deposits. Additionally, sulfidic ores generally contain other valuable minerals that can be extracted during nickel production.
Separating nickel from sulfidic ores takes place using froth flotation tanks and magnetic processes. These produce two products – nickel matte and nickel oxide. These intermediate products contain between 40 and 70% nickel, but each requires further refining.
Further processing of nickel matte occurs using the Sherritt-Gordon process. With this technique, hydrogen sulfide is added to the molten material to remove copper. This leaves a concentrate of only cobalt and nickel. Solvent are then used to extract cobalt. This leaves a final product with a nickel concentration of more than 99%.
Further processing of nickel oxide occurs using the Mond process. With this technique, nickel reacts with carbon monoxide at temperatures of between 100℉ and 175℉ to produce nickel carbonyl.
At this point, chemists obtain purer nickel from the nickel carbonyl through one of two processes:
The high iron content of lateritic ores makes smelting the preferred method of nickel extraction. Lateritic ores have high moisture content that requires drying the ores in kiln furnaces.
These kiln furnaces produce nickel oxide from the lateritic ores. At this stage, electric furnaces heat the nickel oxide at temperatures between 2,480 and 2,930℉ and produce Class 1 nickel metal and nickel sulfate.
The natural iron content of lateritic ores usually creates a final product after smelting that is ferro-nickel (a combination of iron and nickel). Steel producers can remove impurities such as silicon, carbon, and phosphorous from this combination and produce strong steel alloys.
Very little nickel is recycled to its original elemental state. Instead, scrap products are often recycled into economically valuable materials containing nickel.
For example, it is generally not economically feasible to extract the nickel from scrap stainless steel products. However, recycling these products allows manufacturers to create new stainless steel products that contain nickel.
Nickel is strong, ductile, magnetic, corrosion- resistant and heat-resistant. As a result of these favorable properties, nickel has become one of the most widely used metals in the world.
What Drives the Price of Nickel?
The price of nickel is driven mostly by these five factors:
China accounts for more than half of the annual global demand for nickel. Only 10 years ago, Chinese nickel consumption represented less than 20% of global demand.
Rapid economic development in China over the past decade has certainly accounted for the increased consumption. However, China’s GDP growth has slowed considerably in recent years, creating doubts about future demand for all industrial metals including nickel.
Ultimately, nickel prices depend heavily on Chinese demand for everything from stainless steel products to batteries. If industrialization and urbanization in China renews its high growth trajectory, then the price of nickel should rise. Traders should pay close attention to Chinese economic data for clues about nickel prices.
The London Metals Exchange (LME) keeps track of global stock levels for nickel and other industrial metals. Traders follow these inventory levels closely for clues about supply shortages or surpluses.
If inventory levels drop, the market may be facing a shortage of nickel supply in the near future. This could lead to higher prices for the metal. Similarly, if stockpiling occurs and inventory levels expand, then the market might face an oversupply of the metal, which can lead to lower prices.
Nickel traders keep close tabs on Chinese inventories, in particular, since they have the largest impact on nickel prices. Data on shipping containers entering Chinese ports can provide valuable clues about demand for nickel and other commodities.
Overall economic activity, particularly in the industrial sector, affects demand for nickel.
The use of nickel in stainless steel alloys for building projects is a market segment that deserves close attention. Stainless steel nickel alloys are used to produce durable structures and protect against corrosion. The Great Bridge of China is one example of a construction project that used nickel.
The United States has not invested in major infrastructure projects in decades.
If the government earmarks funding for new infrastructure projects, the price of nickel could move significantly higher. Similarly, as other developed economies replace their infrastructure, nickel prices could rise.
There are numerous examples of government policies affecting nickel prices:
Historically, Indonesia has been a leading exporter of nickel. However, the country has also banned laterite ore exports in recent years. The rationale for this policy was a desire by the government to support the domestic smelting industry. Ultimately, budget deficits in Indonesia led to a resumption of exports.
The Philippines, the world’s largest nickel miner, has recently threatened to end all mining in the country.
Actions by these and other governments can have a dramatic effect on nickel supplies and prices.
Nickel occurs in ore bodies, and breaking down these ore bodies to extract nickel expends energy.
Producing nickel requires ample supplies of coal, electricity and crude oil.
Mines and blast furnaces utilize energy to extract nickel ores from the ground and process it into nickel. These costs can have a big effect on primary production. Similarly, the costs of scrap metal can impact the price of secondary production.
What Do Experts Think About Nickel?
Many analysts have a dour view of the nickel market. They cite overproduction from major producers Indonesia and the Philippines as reasons for their pessimism.
“Miners have been holding on as long as they can. They will be close to running out of wiggle room in terms of cutting costs. We need to see some reasonably sized refined capacity cutbacks to restore prices and confidence back to the market.”
Mark Pervan, consultancy AME Group, Sydney
Other experts agree that the current economic fundamentals of the nickel industry are unsustainable.
Consultant Wood McKenzie notes that half of the global nickel miners now operate at a loss, while Citi recently informed its clients that it sees little chance for a rally in prices in the short, intermediate, or long run.
Where Can I Trade Nickel?
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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.
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