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Nickel price plunges from five-year high

By Lawrence Gash

Fall in stainless steel demand linked to nickel drop

The price of nickel has fallen significantly in the past three months even though it hit its highest point in five years only this September (2019).

The drop off in value has been attributed to the ongoing quagmire of US-China trade negotiations and the decision by American president Donald Trump to impose metals tariffs on Brazil and Argentina.

London Metal Exchange nickel currently stands at $13,195 (€11,893, £10,016) per tonne down from the metal’s five-year high of $18,850. This early-autumn surge was triggered by the Indonesian government’s surprise decision to bring forward a ban on nickel ore exports. As the largest nickel exporter in the world this rocked metals traders and industry figures, who rushed to get ahead of the January deadline.

Nickel ore is used to manufacture pig nickel iron (PNI), a cheaper alternative to pure nickel, which can be used in the production of stainless steel.

Indeed, the waning demand for stainless steel might explain nickel’s recent drop off. According to JP Morgan analysts, stainless steel production will contract by 7 per cent in 2020. This would be the largest drop in since 2009 and would equate to 1.7 million fewer tonnes of stainless steel being produced.

There is debate as to whether stainless steel demand in China, the largest importer of nickel ore and largest manufacturer of PNI, will rise or fall next year. Goldman Sachs analysts have not forecast any reduction in production whereas JP Morgan analysts have described China’s current stainless steel output as unsustainable and outstripping actual demand.

If US-China trade talks end positively, with a limited initial trade deal and the lifting of a number of tariffs, then nickel’s price will surely stabilise if not rise again.

As nickel is an essential element in the production of batteries for electric vehicles demand for it outside of the stainless steel industry is set to grow significantly.

FURTHER READING: Chinese industrial commodities sink as US tariff war continues

FURTHER READING: Western Australia provides $4.93 million funding package for nickel and gold exploration

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