Page 46 from: Recycling International January/February issue 2023

MARKET ANALYSIS

Rebalancing after hectic
2022
After the tumultuous switchback in LME trading in March, nickel has been the

price performer among major base metals as LME nickel stocks have declined

further.

Financial Conduct Authority. As if that
weren’t enough, new competition for
the LME is taking shape in the form of
Global Commodities Holdings’
announcement that it will be launch a
new physical trading platform for nick-
el in February. Global Commodities is
headed by former LME ceo Martin
Abbott.

MARKETS SEEK DIRECTION
For nickel-based product buyers and
sellers, having a transparent, function-
al nickel price discovery mechanism is
critical. Nickel end-users in the stain-
less steel and EV battery sectors are
facing a range of other challenges and
evolving market dynamics. According
to worldstainless, global stainless
steel melt shop production declined
5.1% year-on-year during the first nine
months of 2022 to 41.85 million
tonnes. Production declines in the
West were significant, including an
11.2% drop in European stainless
production and a 13.2% decline in
US output. As China continued to
struggle with Covid restrictions,
worldsteel reports Chinese stainless
melt shop production fell 5.2%
during Jan-Sep 2022 to 23.64 million
tonnes.

EXPECTED SUPLUSES
In addition to falling stainless steel
production, the Chinese market is fac-
ing a number of conflicting trends.
Amid large discounts for NPI, rising
Indonesian output, and Tsingshan
Holding Group’s reported plans to
shift from copper to nickel metal pro-
duction, nickel market surpluses are
expected to persist. Macquarie ana-
lyst Jim Lennon projects global nickel
market surpluses of 125 000 tonnes
and 112 000 tonnes in 2023 and 2024,
respectively. On the other hand,
Chinese demand for electric vehicles
(and EV batteries) has been a support-
ive feature, despite the pandemic’s
impacts on Chinese growth.
According to the China Passenger Car
Association, China sold 5.67 million
electric vehicles and plug-ins in 2022,
nearly double the 2021 level and five
times more than the number of EVs
sold in the US last year.

suit filed by hedge fund AQR Capital
Investment and other plaintiffs has
reportedly been dismissed, the inde-
pendent review of nickel market events
conducted by Oliver Wyman and
released in January identified signifi-
cant problems. In particular, the review
recommends new and improved LME
rules to prevent risks and strengthen
enforcement, including volatility con-
trols to slow down extreme price
moves, and new processes to effective-
ly manage client defaults on OTC, as
well as centrally cleared positions. In
addition, the LME’s decision-making
and governance are still the subject of
separate regulatory reviews being con-
ducted by the Bank of England and the

46

LME nickel ended last year 40% high-
er than the end of 2021 at US$ 30 048
a tonne, easily outperforming the
other major nonferrous metals, as
stocks in LME warehouses contracted
to around 50 000 tonnes, down from
more than 90 000 tonnes a year
before. At the same time, investor
confidence in the LME’s ability to con-
tinue being at the centre of nickel
trading and price formation has yet to

fully recover from the events of March
2022. Andy Home of Reuters reports
LME nickel trading volumes were
down 28% last year while nickel trad-
ing volumes in Shanghai plunged 70%
lower.

CONFIDENCE IN LME
For the LME, the road back to restor-
ing confidence may be longer than
previously expected. Although the law-

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