Nickel Prices are Witnessing a Constant Rise Lately Amid Strong Downstream Demand, Fed Rate Cuts, and Chinese Stimulus

Nickel prices have been steadily increasing, with recent data showing a jump past US $18,000 per metric ton on the London Metal Exchange (LME), reaching a three-month high. Several key factors are driving this trend. The U.S. Federal Reserve's 0.5% interest rate cut on September 18, the first since 2020, has fueled investment in industrial and construction projects, increasing demand for metals like nickel. This monetary policy move has also weakened the U.S. dollar, making dollar-denominated commodities more attractive to international buyers, further supporting higher nickel prices.

Chinese economic stimulus measures have also contributed to the upward movement. Production cuts by Tsingshan, China’s largest nickel producer, due to iron ore supply issues in Indonesia, have disrupted the market. Delays in mining quota approvals have increased production costs, pushing Indonesian smelters to source iron ore from the Philippines, which has led to a significant rise in Philippine ore imports. Taiwanese stainless steel producers have raised their prices for November, citing higher raw material and energy costs as key drivers, which has further supported nickel's price surge.

In the coming months, nickel prices are expected to maintain their upward trend due to persistent supply and demand dynamics. Indonesia, now controlling nearly two-thirds of global nickel supply, is restricting ore exports to China to bolster its domestic processing industry. This move reduces global availability and adds to price pressure. Meanwhile, demand from the electric vehicle (EV) sector is rising, with global EV sales increasing by 22% through September. This robust growth in the EV market is bolstering the demand for nickel, a key component in battery production.

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Despite promising drill results from companies like Canada Nickel indicating potential future supplies, these will not affect current prices. Western governments are heavily investing in domestic mining projects to diversify supply chains and reduce reliance on dominant players. This includes significant funding allocations to bolster critical mineral production, such as a $4 million grant to Canada Nickel for engineering studies under a $1.5 billion critical minerals infrastructure fund. However, these efforts are aimed at future supply stabilization and will not ease current market constraints.

The combination of Indonesia’s strategic supply restrictions, the expanding EV market, and increased production costs suggests that nickel prices are likely to continue their upward trajectory in the near term.