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Post Market Wrap | Nickel price surges to 15-year high above US$40,000/tonne



This Post Market Wrap is presented by KOSEC – Kodari Securities

  • LME imposes price curbs to restore an orderly market  
  • Nickel is an essential ‘battery metal‘ for clean energy
  • Lithium battery demand is key long-term driver of Nickel price 
  • IGO owns 25 percent stake in world’s largest lithium mine

Nickel price surge

The price of nickel quoted on the London Metal Exchange (LME) spiked above US$40,000 a tonne this week, up US$10,000 in a single day, to a 15 year high. This is the largest daily dollar gain in recorded history of the metal. To put this price in perspective, Nickel was trading at US$15,000 a tonne in June 2021 and US$8931 a year earlier. 

The sharp price rise has caused the LME to impose price curbs on contract prices quoted on the Exchange in an attempt to stabilise the market. This is a move rarely seen on the LME and reflects the serious concern that delivery of forward contracts may not be fulfilled. The LME observed in a release to Members of the Exchange on 7 March that the impact of existing low stock levels is having an impact on prices. This tight supply existed before Russia launched the war on Ukraine.  

The sharp price increase is directly attributable to sanctions imposed on Russia that prevent the shipment of the metal at a time when it was already in short supply. The supply pressures have been brought about by supply constraints in Indonesia and already strong demand from stainless steel producers and battery manufacturers. 

Indonesia is the world’s largest producer of nickel. Australia, Indonesia, South Africa, Russia and Canada account for more than 50 percent of the world’s nickel resources. 

Strategic significance of Nickel

While about 70 percent of the world’s nickel is used for stainless steel, its use in lithium batteries for Electric Vehicles and for battery storage, is what gives this metal its strategic value. Tesla have stated that lithium batteries in their Electric Vehicles comprise 85 percent nickel. Reinforcing the strategic value of nickel for use in car batteries, the International Energy Agency has forecasted that there are expected to be 125 million Electric Vehicles in use by 2030. This compares to about 6 million Electric Vehicles in use in 2018.

Presently, batteries account for 8 percent of nickel usage. However, this number is growing exponentially as the demand for Electric Vehicles is set to rise substantially. This demand has been boosted by the significant upturn in oil prices which saw Brent Oil for May 2022 delivery hit US$139 a barrel today. This implies significantly higher petrol prices in the months ahead, compared to today’s petrol price. The implication of higher oil prices is clearly positive for Nickel producers.

However, nickel for use in lithium batteries must be of a select type, known as Class 1 nickel, which contains more than 99.8 percent nickel content.  This high-purity form of nickel is found in significant quantities in Russia which accounts for about 17 percent of the world’s supply. The opportunity exists for Australian producers to focus on this market segment and generate higher margins than what can be earned from nickel used in stainless steel production.

Image: File

Stocks to benefit from rising nickel prices 

IGO Limited (‘IGO’) has a deliberate focus on ‘clean energy’ metals that are essential to enabling clean energy production, including ‘battery metals‘ for use in Electric Vehicles. This focus is by way of a 49 percent JV stake in Chinese-owned Tianqi Lithium Energy Australia. This JV provides IGO with a 25 percent interest in the Greenbushes lithium mining operation and a 49 percent stake in the processing plant at Kwinana. The Greenbushes lithium mine in WA is the world’s largest lithium mine.

Another stock set to benefit from the burgeoning demand for Class 1 nickel used in the battery and Electric Vehicle market is Western Areas. Western Areas’ Odysseus mine development is rapidly advancing so as to come into production from FY24 to supply the battery market which is dominated by China, South Korea and Japan.

This Post Market Wrap is presented by Kodari Securities, written by Michael Kodari, CEO at KOSEC.

Michael Kodari is one of the world's most consistent, top performing investor. A philanthropist and one of the prominent experts of the financial markets, he has been referred to as ‘the brightest 21st century entrepreneur in wealth management' by CNBC Asia and featured on Forbes. Featured on TV as the "Money Expert", on the weekly Sunday program "Elevator Pitch", he is recognised internationally by governments as he was the guest of honour for the event "Inside China's Future", chosen by the Chinese government from the funds management industry, attended by industry leaders, when they arrived in Sydney Australia, on April 2014. Michael and George Soros were the only two financiers in the world invited and chosen by the Chinese government to provide advice, and their expertise on Chinese government asset allocation offshore. With a strong background in funds management and stockbroking, Michael has worked with some of the most successful investors and consulted to leading financial institutions. He was the youngest person ever to appear on the expert panel for Fox, Sky News Business Channel at the age of 25 where he demonstrated his skillset across a 3 year period forming the most consistent track record and getting all his predictions right over that period. Michael writes for key financial publications, is regularly interviewed by various media and conducts conferences around the world.

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Management shake up at under fire Qantas



There’s been a management shake up at Australia’s flag carrier airline Qantas, which has come under fire for cancellations and delays

Jetstar CEO and longtime Qantas executive Gareth Evans has resigned.

He was touted as a potential replacement for controversial Qantas CEO Alan Joyce.

Gareth Evans has been with Qantas for 23 years.

He has been chief of Jetstar since 2017, but has worked across the group and has now “decided this is the right moment to move on”.

This comes as the aviation grapples with the higher fuel prices and staffing issues at airports that are affecting much of the industry globally.

Strong demand

Qantas has also updated the market, saying it’s on track to record second half earnings of just over 500 million dollars.

Underlying profit is set to return in FY23, while debt levels are now well below pre-pandemic levels.

Qantas says this is due to continued strong domestic and international travel demand.

Qantas has come under fire for long delays and cancellations
Qantas has come under fire for long delays and cancellations

After peaking at more than $6.4bn at the height of the pandemic, net debt is expected to fall to around $4bn by June 30, an improvement of around $1.5bn in the past six months.

The airline has come under sustained pressure, with many passengers complaining about long queues, cancellations and delays.

Qantas is calling for patience ahead of the winter school break rush as it hires more staff to manage increased demand at airports.

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Nike to fully exit Russia




U.S. sportswear maker Nike is making a full exit from Russia, three months after suspending its operations there, the company said in an emailed statement Thursday

The sportswear giant had said back in March that it would suspend operations at all the stores it owns or operates there.

On Thursday (June 23) the firm said it would leave the country altogether.

In a statement, Nike said it would scale down over the coming months.

The move is largely symbolic for the company, which gets less than 1% of its revenue from Russia and Ukraine combined.

It says any stores that are still open there are run by independent partners.

In May, Russian media reported that Nike had not renewed agreements with Inventive Retail Group, its largest franchisee there.

Now the full exit lputs Nike in line with other major western brands such as McDonald’s and Google.

Foreign companies seeking to leave face the prospect of new laws being passed that will allow Moscow to seize assets and impose criminal penalties.

That has prompted some businesses to accelerate their departure plans.

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U.S. orders vape company Juul to cease sales




Juul has been an industry leader in the vaping sphere since its establishment in 2015, controlling 75 per cent of America’s market by its third year of operations.

This is just the latest crackdown on the Tabacco industry by the Biden administration, all part of a sweeping effort to regulate the sector after years of delay.

The White House has also announced a rule to establish a maximum level of nicotine in tobacco products in an attempt to make them less addictive.

After a nearly two-year-long review, the FDA said Juul submitted insufficient and conflicting data to show that its e-cigarettes met public health standards.

The regulator also said the findings raised “significant questions,” including whether potentially harmful chemicals could leach out of Juul pods.

The decision potentially deals a fatal blow to the once high-flying San Francisco company.

Juul did not immediately respond to a Reuters request for comment.

The FDA had to judge whether Juul’s products, which have been sold for years without being officially authorized by the agency, were effective in getting smokers to quit and, if so, whether the benefits to smokers outweighed the potential health risks to new e-cigarette users, including teenagers.

“They prey on children.”

Democratic Senator Dick Durbin hailed the decision by the FDA on Thursday, but said “they’re in for a legal battle for sure.”

Earlier this week, the Biden administration said it also plans to propose a rule establishing a maximum nicotine level in cigarettes and other tobacco products to make them less addictive.

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