Supply chain and margin call… The rise in nickel prices has come to the fore due to the trade-induced and margin call of those caught in short positions in the LME. The disruption of supply chains caused by the risks of war causes a serious price increase. Price interactions can lead to greater price movements, given the state of sanctions and demand. Under normal circumstances, the situation is positive for the producer, but the balance here will work a little differently as the sanctions have upset the balance for Russia.
List of countries by nickel production… Source: U.S. Geological Survey, Mineral Commodity Summaries
Production shock and demand network… It is worth mentioning once again. It is not only the cost factor that explains the prices, but also the lack of commodities in the market. Nickel is used in many industrial and consumer products such as stainless steel, alnico magnets, coins, rechargeable batteries, electric guitar strings, microphone capsules, coating on plumbing fixtures and permalloy, elinvar and special alloys. Today, stainless steel; It is frequently used in the production of transportation vehicles such as locomotives, airplanes, trucks and wagons. Nickel is used in engine parts because of its resistance to high or low temperatures. Examples of this situation are jet engines and gas turbines.
Therefore, it directly concerns branches such as iron and steel and automotive in the sectoral sense. Russia supplies 10% of nickel production. As the risks of war disrupt the production network, we will experience many limitations in the supply of goods. Industrial demand may cause substitutions to be sought from dominant markets outside of Russia. Indonesia and the Philippines, which are the sanction-free markets ahead of Russia in world nickel production, stand out.
Nickel 3-month rolling price and Russia total nickel export comparison… Source: Bloomberg
Conclusion? Due to the fact that nickel is an important alloying metal and its usage network in the industry, the production costs of many companies will be directly affected. Unprecedented prices are being experienced, encompassing movements in almost all commodity groups, as the uncertainty of the war has added to the disruptions in the supply chain. Prices have been rising for weeks as he worries about a possible disruption to supplies from Russia, the largest exporter of refined nickel. Manic market movements may trigger economic production costs and margin call and short squeeze movements in financial markets. Price volatility, on the other hand, is likely to continue due to the political crisis and uncertainties regarding production, as well as the additional effects that may come from the embargo.
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