Market Overview

Nickel prices have been experiencing significant volatility over the last couple of weeks. They rose by 17% from $20,450 on January 10 to over $24,000 on January 21 for a standard 1.5-ton contract. This is the highest price recorded since 2011.

This week nickel prices dropped by 7% to $22,400 on a single day. This happened on January 24 and prices continued to decline at the opening on January 25 towards $22,130 and a marginal recovery to $22,450 on Tuesday afternoon. What is going on and what may be expected?

The rally in nickel prices was largely initiated by the rise of the demand for this metal. It is primarily used in electric vehicle (EV) batteries and is a symbol of the shift towards a green economy. The demand for this metal is rising as the pandemic fades and business activity is restored. This is driving car prices up, including EV prices.

The International Energy Agency suggests that the demand for nickel should grow 19-fold to meet Paris climate agreement targets. However, the immediate reason for the price rally was the fact that nickel stocks in China have severely depleted to the record minimum of 4859 tons. Meanwhile, China’s central bank lowered its LPR interest rates on January 20 to support the economy. This immediately raised demand for non-ferrous metals and nickel prices took a lead in this rally.

This week these reasons were absorbed by the market, while the rally was considered to be too emotional, making the market reverse on Monday. The upcoming Federal Reserve (Fed) meeting, which is expected to provide further monetary tightening signals, has pressured risky asset prices to the downside. This time nickel was also ahead of its peers, but to the downside. Some steam was let out and prices are seen to be normalising in the narrow trading range of $22,000-22,700.

Further price movements may be caused by the Fed’s decisions and statements. Technically, nickel prices may continue down amid hawkish rhetoric from the Fed and news about the developments of nickel projects in Tanzania and Indonesia that amount to about $20,000 per contract. But the overall upward trend for nickel prices is still intact and in the upcoming months prices may recover to $24,000.

Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.