October 21, 2021 – Nickel rally: Surprisingly for many, nickel values on the LME and SHFE made massive gains on 20 October. At times they went up by well over 6%, sending nickel on the LME over $21,000 per tonne. In the meantime, things have calmed down again and we take a look at the background. Chinese alumina production is expected to fall further. And stainless steel prices continue to rise.

Stainless Espresso: Nickel rally 2021 - What happened?
Stainless Espresso: Nickel rally 2021 – What happened?

Nickel rally: What Happened?

After nickel had already rallied significantly since the beginning of October 2021, there were significant upward movements on the LME (approx. +6.2%) and the SHFE (approx. +6.5%) yesterday (Wednesday) and in the night to Thursday. In the meantime, there has been some calming in the market, even though nickel is still holding at a high level. Other metals, such as aluminium, also reacted as we expected yesterday.

What triggered the nickel rally?

As is so often the case, it is not just one thing that plays a role. Usually it is an interplay of several factors. In the current nickel rally it is no different. We summarise the current factors that have certainly had an influence here.

Reporting season for nickel producers

Currently, the most important nickel producers, such as Nornickel in Russia, South32 in Colombia or Vale in Brazil, are publishing their figures for Q3 2021. The Philippine Nickel Association has also spoken. The most likely triggers for the nickel rally can be identified here.

Nickel production declines significantly in some cases

And the production volumes for nickel this year are not particularly positive. In the Philippines, it is expected that 10% less nickel will be shipped in 2021 – due to bad weather and a lack of ships for transport. Vale Brazil reports 22% less production in Q3 than in the same period in 2020 due to difficulties with workers. Russia’s Nornickel will mine a total of about 23% less nickel this year due to water ingress at two mines. And South32 reports a 12% decline for its mine in Colombia due to disruptions.

Outlook for nickel demand remains high

Nickel demand has shot up in 2021. Primary demand drivers are the EV battery industry and significantly increased demand for precious steels. Furthermore, supply is not expected to meet demand again until 2023/2024 at the earliest.

Bidding war for nickel-copper miner Noront Resources

In addition to all this, BHP and Wyloo Metals are engaged in a bidding war for nickel-copper miner Noront Resources. BHP’s bid is now 200% higher than Noront’s current enterprise value. This, of course, further fuels the market, because it shows how high the demand for further mining capacity is.

Alumina market expected to grow further

Alumina production in China is expected to continue to decline in the coming heating season. Alumina producers in Henan Province have been asked by the local government to reduce energy consumption. Together with the flooding in Shanxi Province, which has caused alumina production stoppages, and due to difficulties in sourcing raw materials such as bauxite, alkali and coal, alumina prices are expected to rise further. In addition, demand for aluminium products continues to be unbroken.

Stainless steel prices rise again

Due to the increase in nickel prices, stainless steel futures on the SHFE have reacted accordingly and have risen. Stainless steel prices have also increased on the Chinese spot market.

US stainless steel scrap prices also rise

Stainless steel scrap prices continue to rise in the United States. The main reasons are tight availability and rising nickel prices. For the United States, which mainly relies on the production of steel from Electric Arc Furnaces (EAFs), scrap prices are essential. Rising prices for stainless steel scrap were also reported in the EU.

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