Nickel gains on possible sanction worries
Prices surged to 4-year high of $16,690 on April 19 at the LME

After aluminum, last week it was nickel’s turn to react to the US sanctions on Russian entities. Last week, nickel rose to four-year high during couple of sessions, but lost part of the gains in the subsequent sessions.

From $13,950 per tonne at the London Metal Exchange on April 17, nickel prices surged to four-year high of $16,690 per tonne on April 19. In the Multi Commodity Exchange prices gained almost 15 per cent to touch Rs 1,095.2 per kg.

Nickel counter was gripped by concerns about chances of Russian company Norilsk Nickel, the second largest nickel producer, coming under the US sanctions. On April 6, the US administration had imposed economic sanctions on 7 wealthy Russians, 12 companies controlled by them and 17 senior Russian government officials for allegedly meddling with the 2016 US elections. Americans were forbid from doing business with these entities.

Though Norilsk Nickel was not there in the list of companies facing US sanctions, last week concerns grew to a level that started affecting the market as the tension between the two countries have not been easing. Concerns grew that in the event of US sanctions, supply of nickel might get disrupted, said Kaynat Chainwala, research analyst (base metals), Angel Commodities Broking.

Nickel is an important metal used in the production of steel. The rising steel prices in China too added to the bullishness in nickel. The People’s Bank of China last week cut the reserve requirement ratio for commercial and foreign banks by 100 basis points. This announcement cheered the market as the increased liquidity was expected to boost infrastructure spending. Steel prices gained from this expectation of increased infrastructure spending.

With the spurt in prices last week, nickel has become the best performer among commodities since the beginning of the year. At the MCX, nickel has appreciated by around 36 per cent from the start of 2018.

The demand for metal from the electric vehicle segment has been quite strong in recent times. Nickel and cobalt are important components in electric-vehicle batteries, smartphones and lithium-ion batteries. Further, alloys of nickel and cobalt are used in aviation and in industrial gas turbines as well.

However, after the surge last week nickel could not sustain the gains. In the subsequent days, the metal relinquished part of the gains, but was trading at $14,765 per tonne on the LME, still higher than the levels before the rally.

“Nickel was moving up on concerns about possible sanctions. But the US administration did not impose any sanctions on the company last week and hence the metal gave up part of the gains. But that has not been the case of Aluminum,” said Chainwala.

Aluminum had started moving up in the second week of April as the leading Russian aluminum manufacturer Rusal had indeed come under sanctions. Aluminum prices, which were trading at $1,991 per tonne on April 4, had gone up to $2,277 per tonne by April 12 on the LME, making a gain close to 15 per cent. In the MCX, aluminum had touched an all-time high of Rs 149.2 per kg in the second week of April.

Last week, aluminum continued its momentum as the tensions between the US and Russia were not seen easing. Aluminum further moved up to $2,485 per tonne on the LME and Rs 165.65 per kg on the MCX. Usually, base metal prices move as a group. But in the past two weeks, the gains were specific to aluminum and nickel. While zinc and lead were marginally down, copper was marginally up.

“Going ahead, nickel may not be able to gain further as Norilsk has not come under sanctions. Aluminum prices may remain firm if the situation does not ease,” said Chainwala.

Sangeetha G.