The price of nickel broke through the US$8.10/lb on Friday, as supply shortage fears increased when Indonesia announced a ban on nickel exports beginning in December.
That's more than two years earlier than the Asian nation originally planned, and rumours the export ban would be moved up has helped push nickel prices upward in recent months. Indonesia is the world's largest nickel exporter.
Friday was the largest one-day increase in nickel prices in a decade, according to a story in the Wall Street Journal, and prices have increased by almost 70 per cent since the beginning of the year.
The ban would almost certainly push the global market in refined nickel to a deficit, analysts quoted in the story said.
“All in all, 100,000 tons of refined nickel output will be lost, which will leave the market in a meaningful deficit,” Timothy Wood-Dow, an analyst at BMO Capital Markets, is quoted as saying in the story.
A major waste spill at a Chinese-owned nickel plant in Papua New Guinea could close the facility, stoking market fears further.
“This is a game changer for the market,” said Wenyu Yao, metals strategist at Dutch bank ING. ““It’s not just Indonesia ... All things are coming together to push nickel higher, not just fundamentally but also technically.”
Fears over supply also boosted mining stocks, according to a story from Reuters, with Rio Tinto, BHP and Glencore stocks rising more than two per cent each.
The turmoil has boosted prices in the short term, with analysts even more bullish on nickel in the long-term because of an expected boom in use of electric car batteries in the next decade. A higher grade of nickel is needed to make the batteries, and China is moving ahead with plans to expand electric car production and use.
Volkswagen and Tesla are among car manufacturers with big plans to increase production of electric cars and batteries for their markets.
