Nickel Prices Stabilize After Major Drop, Market Dynamics in Focus
In a striking turn of events, nickel, the worst-performing base metal in 2023 with a 40% loss in value, appears to have found a price floor early in 2024. After plummeting to $15,600 per tonne, a low not seen in at least three years, prices recovered mid-February to levels seen in November 2023. This stabilization comes after a dramatic spike above $100,000 per tonne during the onset of the Russia-Ukraine conflict in 2022, highlighting the volatility and uncertainty in the nickel market.
The trajectory of nickel prices largely hinges on market fundamentals, notably demand and supply factors. Approximately two-thirds of global nickel production is utilized in steel manufacturing, with China being the largest consumer. However, the country's manufacturing sector has shown signs of weakness, as indicated by the PMI index remaining below the 50 threshold for nine of the last ten months, pointing towards a contraction in growth. Particularly, the real estate sector's downturn, evidenced by a reduction in new construction projects, has dampened demand for nickel.
Additionally, the electric vehicle (EV) industry, which accounts for 16% of nickel demand, has experienced slower-than-expected sales growth. This slowdown has led to increased nickel inventories among battery producers, subsequently reducing their procurement of the metal.
On the supply side, Indonesia has emerged as a dominant force, accounting for nearly 50% of global nickel production, fueled by significant Chinese investments in ore processing and refining within the country. Despite a general oversupply in the market since 2021, Indonesia has yet to indicate plans for production cuts, especially for class 2 nickel, predominantly used in steel manufacturing rather than the purer class 1 nickel required for EV batteries.
Investors looking to capitalize on potential nickel price increases might consider the WisdomTree Nickel ETC, which tracks the Bloomberg Nickel sub-index. This index mirrors the price trends of nickel futures on the London Metal Exchange (LME), offering a speculative vehicle for betting on the metal's future performance. The ETC is available for trading on various exchanges in different currencies, presenting an accessible option for those wagering on nickel's market dynamics as it navigates through a period of adjustment and potential recovery.
