Nickel price drops as LME suffers third day of issues - Rested

As the LME suffers from its third day of nickel trading issues, companies further down the supply chain start to find work arounds.

Here is Rystad Energy’s extraordinary energy metals market note from two of our analysts, Marina Bozkurt and Susan Zou:

Nickel

The battery material supply chain has been on standstill for nickel since last Tuesday March 8.

The restart of the nickel trading on the London Metal Exchange (LME) on March 16 hasn’t revived the spot trades for nickel sulfate since both suppliers and buyers intend to do business until the LME nickel prices stabilize, which will in turn provide some clarity on how much nickel sulfate could be priced.

The LME nickel trading was halted on Wednesday and Thursday this week after prices dropped to the daily lower price limit, which was set up initially at 5% on Wednesday and then adjusted up to 8% on Thursday.

The daily up/down limit will be at 12% on Friday (today).

The LME nickel prices are broadly expected to drop further in the next couple of days, correcting previous upturns which was partially as a result of speculative buying. Major consumers are indicating that a price of about 43,000-45,000 yuan per tonne is an acceptable price for nickel sulfate, which is equivalent to an LME nickel price at $26,000-28,000 per tonne.

Therefore, it is estimated that if the LME nickel price would stabilize around $30,000 per tonne, the battery supply chain is likely to resume sales and purchase of nickel sulfate.

As such, even the LME nickel prices continue to hit daily down limit each trading day, it will still take at least three trading days for the price to drop to a tipping point that would trigger appetites for spot trading for nickel sulfate.

Even so, it is estimated that nickel prices are not likely to drop notably below the level prior to March 7 in light of the fact that LME nickel stocks remain at a low level and there is no ease of liquidity issues for Russian nickel products.

The stagnancy of trades for nickel sulfate, a key component to produce nickel-cobalt-manganese (NCM) lithium-ion batteries for electric vehicles, is mainly due to the fact that nickel feedstock for the battery supply chain is priced against LME nickel prices, including mixed hydroxide precipitate (MHP), nickel matte and nickel briquettes.

For instance, MHP, a nickel intermediates that are widely fed by Chinese nickel sulfate producers, is priced at a certain percentage against LME nickel prices.

However, both MHP suppliers and buyers have agreed to skip the quotation period of March due to the volatility of LME nickel prices this month, which hopefully will help to maintain the regular trading and deliveries of this crucial nickel feedstock for the battery supply chain.