Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Nickel prices jumped to the highest level in almost nine months after political violence in New Caledonia disrupted production in the French overseas territory that holds some of the world’s biggest deposits of the mineral.
Futures contracts for nickel, which is a crucial element in electric vehicle batteries and steelmaking, jumped almost 7 per cent on the London Metal Exchange to $21,150 a tonne, before falling back slightly to trade 5 per cent higher.
The price surge on Friday coincided with the release of a report by the International Energy Agency, a watchdog for the world’s wealthiest countries, that predicted robust demand for nickel and other minerals critical for the transition to cleaner energy.
Prices rose after pro-independence protests in New Caledonia, a group of islands between Fiji and Australia, left at least four people dead. French President Emmanuel Macron has declared a state of emergency in the territory, which produces about 6 per cent of global nickel output.
“We have seen these riots . . . If New Caledonia has an ongoing problem, then it is going to make a difference,” said Dan Smith, an analyst at Amalgamated Metal Trading, a brokerage. He added that traders had been generally “downbeat” on nickel, which meant there was “scope for people to get caught out” by sudden price increases.
Nickel prices have dropped about 32 per cent from about $31,000 at the start of 2023 as Indonesia, the biggest producer, increased supply and demand weakened due to weaker than expected sales of electric vehicles.
The “overwhelming consensus” among traders was that the market for nickel was “badly oversupplied”, implying that the current rally would not last, said Smith. “Demand is good for nickel [at the moment] but supply is even stronger.”
Meanwhile, the IEA on Friday warned that sharp declines in the prices of critical minerals in 2023 had created a “headwind” for investment and that “today’s well supplied market may not be a good guide for the future”. Nickel was among minerals facing “substantial geopolitical risks”, it said.
“The world’s appetite for technologies such as solar panels, electric cars and batteries is growing fast . . . but we cannot satisfy it without reliable and expanding supplies of critical minerals,” said IEA executive director Fatih Birol.
Traders have been more bullish on the outlook for copper. Concerns over a potential shortage for the commodity, which is required if the world is going to meet its carbon emission reduction targets, were a major motivation for BHP’s bid for Anglo American.
Aluminium and copper prices both increased more than 1 per cent on Friday.