What the ‘beyond unprecedented’ nickel crisis means for businesses

“We have never seen or experienced anything like what is happening with nickel right now,” said Gary Peters, Director at The Metals Warehouse.

“In March 2022, the situation hit beyond unprecedented levels, with that material increasing to a price on the London Metal Exchange that had never been seen before as a result of the war that is taking place in Ukraine. It led to trading being ceased and one of the biggest manufacturers of nickel reportedly recording an $8 billion trading loss.”

“With the future unclear, UK stockholders of products like stainless steel are wondering what is next and how to react. There is no playbook for this, no previous experience to pull on in order to navigate a market that is in turmoil.”

What is happening to nickel right now?
“Starting with context, nickel is traded as a commodity on the stock market and is traded by the London Metal Exchange. The highest price that nickel has ever reached before this year was approximately $50 000 per ton back in 2007.”

That was down to supply and demand. After the recession in 2008, the price of nickel has ranged between $8 000 and $15 000.

“With the emergence of the EV market, that price accelerated. It began with Covid, as nickel mines operated with reduced staff and capacities. It caused a huge supply and demand issue, which saw the price of Nickel rise to $20 000.”

“However, with the threat of the Ukraine invasion looming, that price began to creep up again, moving to $24 000 and then $27 000. Once the invasion took place and the sanctions began to ramp up, that price ramped up to $30 000 – as high as it had been since 2007 and a hike no one ever thought would happen again. On Monday (7 March), it jumped to $51 000. By 6am on Tuesday (8 March), that price was up to $101 000. At that point, the London Metal Exchange ceased trading, reversed all transitions, and froze trading at $81 000.”

“On Wednesday (9 March), the Nickel was artificially reduced down to $50 000.”

“On Monday (7 March), it was reported that one of the biggest producers of stainless steel, which also mines its own nickel, Tsingshan Holding Group, had a trading loss of $8 billion. Several banks have been on the end of the same loss and have, as a result, been given a boost to help them get back on track.”

“We have no idea what that means for businesses like ours, that buy products with stainless steel in them. The way the price of nickel works in reflection of the price of stainless steel is unbalanced.”

“One of the major mills declares what the surcharge is for the following month on stainless steel and even in a big swing, that price may inflate to £200 per ton or even come down by £200 per ton. However, based on what has happened so far this month, the price of stainless steel is going to increase by thousands of pounds in April. As a world market, that is not sustainable.”

“Stainless steel touches multiple industries, including transport, food, refineries, as well as oil and gas to name a few. Stainless steel touches everything.”

“To put it into context. If you had spent £2 000 on Stainless Steel to refit a kitchen last year, that same Stainless Steel could now cost in excess of £6 000.”