Nickel surges to historic highs, LME suspends trading

London nickel spot prices closed on a historical level of $50,271/t on Monday with the biggest ever single-day gain of 67.22%, as supply disruption fears gripped markets amid an escalating Russia-Ukraine conflict and prices skyrocketed as western sanctions against Russia for invading Ukraine led to supply disruptions.

The LME said "it did not stop trading with Russian companies involved in the sanctions, but said it could take action if necessary".

The three-month LME nickel futures price stood at $48,078/t as of 7 Mar'22, soaring over 65% d-o-d, and nearly double the price at the time of the Russian invasion of Ukraine in end-Feb.

Nickel prices soared to the highest level in more than a decade amid skyrocketing demand for electric cars, as the Ukraine crisis added to supply concerns.

The combination of nickel-cobalt-aluminum is the chemistry behind electric car batteries. Nickel is one of the crucial metals by mass in lithium-ion battery cathodes.

Rapidly increasing demand for electric cars has tightened supplies for the metal and pushed prices on the LME to levels not seen since 2011. Besides rising demand from the electric car industry, the crisis over Ukraine has led to increase in prices.

A similar impact was seen in aluminium futures on w-o-w basis on LME. Russia accounts for 6% of global aluminium production. Short supply due to sanctions will further increase prices which may also benefit Indian producers like NALCO, Hindalco and Vedanta in fullfilling global demand.

However, on d-o-d basis LME futures aluminium closed at $3,740/t yesterday, showing a slight decrease of 3% as against $3849/t on 4 Mar.

Current scenario

LME has decided to suspend the trading of nickel contracts on all venues as of 1:45 PM (Indian Time) 8 Mar due to an unprecedented overnight rise in the three-month nickel contract prices.

The extreme price volatility continued on Tuesday and touched the level of $100,000/t, nearly four times Friday's level, and hence LME stopped trading of Ni future for the day.