Nickel Prices Hit $100,000 a ton, Stainless Steel in Disarray

· London Metal Exchange to suspend trading

[ABS News Service/19.03.2022]

Surging energy prices combined with a massive short squeeze have created a perfect storm that threatens to disrupt the supply of many products people use daily.

The price of nickel went through the roof last week, jumping as much as 250% in two days and briefly reaching a whopping $100,000 a ton. The metal is a key component of stainless steel, used to make items including fridges, surgical instruments, exhaust pipes and vehicle chassis.

The unprecedented surge, fueled by short-position holders (including world No. 1 producer Tsingshan) jostling to get rid of those positions after Russia’s invasion of Ukraine made prices soar, prompted the London Metal Exchange to suspend trading.

Coupled with higher energy prices also exacerbated by the war, the higher prices are taking a toll on companies such Spain’s Acerinox, the world’s fourth-biggest stainless steelmaker, which decided to halt the acquisitions of nickel and launched a furlough plan at its plant in Cadiz, Spain, targeting 1,800 workers.

Although its overall production hasn’t being yet affected, prolonged volatility may prove disruptive for many product supply chains.

To be sure, the Madrid-based company should be able “to manage its near-term deliveries thorough inventories destocking,” Citi analyst Ephrem Ravi wrote in a note Friday, although that assumes “the production stoppages don’t last long.”

Acerinox, however, is not alone. Other steel plants have reduced output in Spain and in the rest of Europe, while difficulties arise broadly across economies, where some German car plants have halted the production of certain models due to the lack of Ukrainian-made components, Italian trawlers have stopped due to high fuel prices and French porcelain factories had to go idle as they grapple with bills 10 time higher than usual.

Russia’s invasion of Ukraine has worsened the situation of businesses already hard-hit by the Covid-19 pandemic.

Inflation is “here to stay,” and big companies halting their production are impacting their consumers as wells their suppliers equally, said Manuel Romera, director of financial sector at Madrid-based IE Business School. “The only way firms have to protect themselves and their investors is trying to pass on increases,” he said. Price surges “may become chilling,” he said.