Nickel spikes 60%: Here's why that matters and who will be hit

The price of nickel spiked more than 60% Monday, one of most extreme moves ever seen on metal markets. Here’s why that matters and who’ll take a hit.

The metal added more than $10,000 to trade at a 15-year high above $40,000 a ton -- the biggest-ever daily dollar gain in the 35-year history of the contract.

Russia is one of the world’s biggest suppliers of the metal, and the fear of sanctions or the inability to ship the metal has spooked an already tight market. Liquidity deteriorated dramatically in the nickel market overnight as sellers rushed to the sidelines, leading to sharp price jumps between trades as short-position holders scrambled for buy backs.

More than 70% of the global supply of nickel goes into making stainless steel. Yet it’s the metal’s use in batteries for electric vehicles that has really caught the market’s attention in recent years.

Currently, only about 7% of the supply goes to battery makers, but exponential growth has been forecast as the take up of EVs is forecast to boom in the coming years.

Russia supplies about 6% of global supply. Yet its importance to the battery industry is much higher. Russia’s MMC Norilsk Nickel PJSC, which operates mines in far northern Siberia, supplies about 17% of the world’s so-called “Class 1” nickel, a high-purity form that’s more suitable for batteries and can be sourced in large quantities from only a few other locations.

The spike in nickel prices, alongside almost every other major commodity needed in manufacturing, is piling pressure on industries around the world.

The nickel market was already exceptionally tight before Russia’s invasion of Ukraine, with strong demand from stainless steel producers and battery manufacturers and supply concerns in Indonesia, the top producer.

That had already led carmakers, including Tesla Inc., to begin looking at cheaper alternatives, concerned about the cost and availability of both nickel and cobalt. Jeep maker Stellantis NV and Volvo Group had already warned higher prices for raw materials would add to supply-chain woes and fuel more inflation for the auto industry.

“The well-flagged headwind from raw material prices is accelerating as a result of the war and could potentially weigh on margins more than initially highlighted by the companies,” Deutsche Bank analysts led by Christoph Laskawi wrote in a March 3 report.