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Nickel is an important metal, and it is the fifth most common element found on earth. They are obtained through mining, and it is also found in open pits.
This metal is highly desirable due to its electronic and magnetic properties. Nickel’s ability to withstand corrosion and heat makes it an ideal metal for use in the energy generation and aviation sector.
In 2020 the global nickel consumption rose to around 2.44 million metric tons which and its consumption is only expected to grow in the future. Nickel is rarely used in its pure form, and it is mostly used in alloy form.
The high consumption and global demand of Nickel makes it an ideal option for trading. LME nickel futures are some of the most commonly traded nickel contracts in the world. The recent spike in the price of Nickel had caused the London Metal Exchange (LME) to stop Nickel futures trading.
LME nickel futures serve as a way to hedge the price of nickel to reduce the price risk associated with nickel. Consumers, merchants, or other entities who deal with nickel can use nickel futures to prevent losses due to unexpected changes in nickel price.
This article is going to explain the key things everyone who is going to invest in LME nickel should know.
While there is a lot of talk of nickel being used in electric vehicle batteries, the major demand for nickel still lies in stainless steel production. Nickel is used as an alloy in stainless steel production and therefore two-third of global nickel production is being used for making stainless steel. Since stainless steel is used in everything from construction, car manufacturing, electronics manufacturing and more, a rise in steel demand can cause the demand for nickel to rise.
If you are going to invest in LME nickel futures, you will also need knowledge of stainless-steel demand. As the demand for stainless steel rises so does the demand for LME nickel futures and this rise can bump up nickel prices.
Another important factor you will need to watch out for when investing in Nickel futures is the supply of nickel. Nickel comes from Russia, Canada, and Australia. The recent surge in Nickel price came after the recent escalations between Russia and Ukraine. Most shippers are not moving commodities including nickel from Russia and with the risk of a potential ban on Russian raw materials the supply of nickel has come under threat.
The threat to nickel supply from Russia has driven the price of Nickel to a record high of $100,000 a ton, which directly impacts the price of nickel futures. If you are planning on trading nickel future contracts then you should watch out for any events that may affect the supply of nickel, such as the ongoing Russian invasion of Ukraine.
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US Dollar is the benchmark for nickel pricing and any fluctuations in the strength of US Dollar can affect nickel prices. Nickel prices and US Dollar value usually have an inverse relationship just like most other commodities. Which means if the value of US Dollar decreases the price of nickel increases and when the US Dollar gets strong the nickel prices drop.
Nickel is bought globally and buyers from different countries use their own currency and convert it into US Dollar to purchase nickel. So, when the US Dollar loses its value, they have to use more Dollars to buy nickel, thus driving up the price of nickel.
So similar to other factors mentioned above, it is important to keep an eye on any changes in the value of US Dollar when you are trading LME nickel futures.
Keeping an eye on the value of US Dollar can also help you predict the demand of nickel. For example, as US Dollar becomes stronger, nickel becomes cheaper and the demand for cheaper nickel will be higher and vice versa.
The London Metals Exchange (LME) keeps track of global nickel and industrial metal stock levels. Traders closely monitor inventory levels for signs of supply shortages or surpluses. If inventory levels fall, the market may face a nickel supply crisis in the near future. This could result in higher metal costs. Similarly, if hoarding takes place and inventory levels rise, the market may experience an oversupply of the metal, resulting in lower pricing.
Because Chinese inventories have the greatest impact on nickel prices, nickel traders keep a careful eye on them. Data on shipping containers entering Chinese ports can reveal important information on nickel and other commodity demand.
China has a strong demand for nickel. The high consumption of nickel in the growing Chinese market can drive the price of nickel futures. China is the largest consumer of nickel in Asia. In the year 2020 China consumed up to 1.31 million metric tons of Nickel. Once you consider that the whole Asian continent had a nickel consumption of 1.9 million metric tons in the same year, it is not difficult to understand that China’s demand for nickel is a driving force behind LME nickel futures prices.
If you are going to invest in LME nickel futures, you should keep an eye on China’s nickel demand and overall development of the country. Following these trends about Chinese development can help you get an idea of any potential price fluctuations that may be caused by Chinese demand of nickel.
At Orient Futures, we provide traders and hedgers with access to the world’s major futures exchanges, from the LME to the Shanghai International Energy Exchange, to trade and hedge their positions.
We are an official MAS regulated broker as well as an official overseas intermediary, allowing traders to access a spectrum of futures and options in Chinese and global exchanges including the INE, DCE and ZCE.
With us, you can enjoy direct access to trading, clearing and settlement. Our parent company, Shanghai Orient Futures, is the largest broker in terms of aggregated volume across the five regulated exchanges in China.
Learn more about trading nickel futures with Orient Futures here.
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