Nickel is a pretty useful metal because it does not corrode easily. It is used in stainless steel. Apart from that, it is used in batteries, rechargeable nickel-cadmium batteries and nickel-metal hybrid used in hybrid vehicles. Nickel has a long history of being used in currency coins. It is always in high demand due to the multi-use. But the dramatic thing happened on Tuesday 8th March. When Nickel rides a skyrocket and reaches from $28,000 to $100,000 in a Single Day!
It never happened when a contract nearly went up to 300 per cent in the space of a day. It happens on the London Metal Exchange. It was highly impacted and volatile because of the Russia-Ukraine Invasion. Because Russia is the third-largest Nickel producer in the world. Russia alone fulfils the almost 10 per cent demand. But nowadays nobody wants to deal with Russia. The Nickel supply was choked and we might see more price hikes in it in near future.
Types of Nickel Metal
There are two types or we can say variants of Nickel-metal are traded on exchanges. The Nickel which is traded on the London metal exchange is known as the Class 1 Nickel Metal. Because it is the purest form of Nickel. It must be at least 99.8% pure. But our half of the world does not use it. We use the less refined Nickel which is known as Class 2 Metal. It is in the form of ferronickel and nickel pig iron. This form of nickel-metal can be cheaply converted into stainless steel in the smelters.
How Metal trade works?
When you mine Nickel, you have to deal with one problem. The main problem is volatility in the price. Let’s assume that you are the mine owner and mine and sell at $3000 per tonne. But once you mine the Nickel and it is in the process the price will drop to $28000. You have to take a hit of $2000 per tonne in your bottom line. Everyone is facing this problem so they come up with a solution to commodity exchange.
Commodity exchange such as London Metal Exchange is the life savvier for the metal ore producer. Where metal ore miner makes a bet or a trade and fixes the price. In our example, the bet is set at $30000. It means when you process and produce it no matter what price it is traded at that time the buyer must have bought it from you at the contract price. Just like a coin, it has both sides. Suppose when it will process and ready to sell the prices dropped then the ore seller is in the profit. But what is the price hike at the time of sale? Ore seller is not able to get benefit from that.
But now the Russia-Ukraine invasion happened. Your assumption of the Metal price completely goes wrong. Prices won’t go down and become a skyrocket. Now everyone takes the other side of the bet or risks making a huge loss. With a sudden reversal in expectation, It rises further. Everyone is in panic and then London Metal Exchange adjourned the Trading. So, it comes down from $100000 per tonne to $48000 per tonne. But still fear of price hikes is there.
So yeah, right now the price of Nickel is still skyrocketing. Also, London Metal Exchange has not re-established its trading sessions. We can not predict how it will be turned out when trading sessions are resumed. Well, we don’t know it but one thing we can assume is that you gain some info through this article and also you shared it with your friends as well!
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