On this page, you’ll learn about the main uses of nickel, how and where it’s produced, nickel’s main price drivers, and some expert opinions on nickel as a commodity.
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What Is Nickel?
Nickel is a solid, lustrous, silvery-white metallic element that is strong, ductile, magnetic and resistant to corrosion. It also has a high melting point and catalytic properties.
Nickel’s favorable traits make it one of the most widely used industrial metals on earth.
Why is Nickel Valuable?
By the late 1800s, iron and steel manufacturers discovered they could strengthen traditional steel by creating alloys with nickel.
Discovery of new ore deposits in the early 20th century combined with strong demand for steel during World War I and World War II ushered in the modern nickel production industry.
Today mines worldwide extract more than 2.25 million tons of nickel annually.
In addition, recycling efforts account for additional supplies of the metal.
Over 300,000 products in the consumer, industrial, military, transport, aerospace, marine and architectural sectors use nickel. As a result, nickel has become an essential commodity in world markets.
How Is Nickel Produced?
The supply of nickel derives from two sources: primary production (mining) and secondary production (recycling).
Mining provides most of the supply, although the United States Geological Survey (USGS) estimates the quantity recovered from recycling in the United States represented 43% of total consumption.
The Philippines is the largest nickel mining country in the world. However, no single country dominates in production of the metal. Mining takes place in a variety of geographies and countries:
These are the reserves of each country as reported by the USGS:
RankFlagCountryThousands of Metric Tons #1Philippines500,000 #2Russia256,000 #3Canada255,000 #4Australia206,000 #5New Caledonia205,000 #6Indonesia168,500 #7Brazil142,000 #8China90,000 #9Guatemala58,600 #10Cuba56,000Nickel derives primarily ore mining, more specifically, from two types of ores, sulfidic and lateritic. Each type has specific characteristics related to how it is mined:
Processing the ores and separating nickel from them also varies depending on the ore type.
Although sulfidic ores are more expensive to mine, separating the nickel from these ores is cheaper than extracting nickel from lateritic deposits. Additionally, sulfidic ores generally contain other valuable minerals that can be extracted during nickel production.
Separating nickel from sulfidic ores takes place using froth flotation tanks and magnetic processes. These produce two products – nickel matte and nickel oxide. These intermediate products contain between 40 and 70% nickel, but each requires further refining.
Further processing of nickel matte occurs using the Sherritt-Gordon process. With this technique, hydrogen sulfide is added to the molten material to remove copper. This leaves a concentrate of only cobalt and nickel. Solvent are then used to extract cobalt. This leaves a final product with a nickel concentration of more than 99%.
Further processing of nickel oxide occurs using the Mond process. With this technique, nickel reacts with carbon monoxide at temperatures of between 100℉ and 175℉ to produce nickel carbonyl.
At this point, chemists obtain purer nickel from the nickel carbonyl through one of two processes:
The high iron content of lateritic ores makes smelting the preferred method of nickel extraction. Lateritic ores have high moisture content that requires drying the ores in kiln furnaces.
These kiln furnaces produce nickel oxide from the lateritic ores. At this stage, electric furnaces heat the nickel oxide at temperatures between 2,480 and 2,930℉ and produce Class 1 nickel metal and nickel sulfate.
The natural iron content of lateritic ores usually creates a final product after smelting that is ferro-nickel (a combination of iron and nickel). Steel producers can remove impurities such as silicon, carbon, and phosphorous from this combination and produce strong steel alloys.
Very little nickel is recycled to its original elemental state. Instead, scrap products are often recycled into economically valuable materials containing nickel.
For example, it is generally not economically feasible to extract the nickel from scrap stainless steel products. However, recycling these products allows manufacturers to create new stainless steel products that contain nickel.
Nickel is strong, ductile, magnetic, corrosion- resistant and heat-resistant. As a result of these favorable properties, nickel has become one of the most widely used metals in the world.
What Drives the Price of Nickel?
The price of nickel is driven mostly by these five factors:
China accounts for more than half of the annual global demand for nickel. Only 10 years ago, Chinese nickel consumption represented less than 20% of global demand.
Rapid economic development in China over the past decade has certainly accounted for the increased consumption. However, China’s GDP growth has slowed considerably in recent years, creating doubts about future demand for all industrial metals including nickel.
Ultimately, nickel prices depend heavily on Chinese demand for everything from stainless steel products to batteries. If industrialization and urbanization in China renews its high growth trajectory, then the price of nickel should rise. Traders should pay close attention to Chinese economic data for clues about nickel prices.
The London Metals Exchange (LME) keeps track of global stock levels for nickel and other industrial metals. Traders follow these inventory levels closely for clues about supply shortages or surpluses.
If inventory levels drop, the market may be facing a shortage of nickel supply in the near future. This could lead to higher prices for the metal. Similarly, if stockpiling occurs and inventory levels expand, then the market might face an oversupply of the metal, which can lead to lower prices.
Nickel traders keep close tabs on Chinese inventories, in particular, since they have the largest impact on nickel prices. Data on shipping containers entering Chinese ports can provide valuable clues about demand for nickel and other commodities.
Overall economic activity, particularly in the industrial sector, affects demand for nickel.
The use of nickel in stainless steel alloys for building projects is a market segment that deserves close attention. Stainless steel nickel alloys are used to produce durable structures and protect against corrosion. The Great Bridge of China is one example of a construction project that used nickel.
The United States has not invested in major infrastructure projects in decades.
If the government earmarks funding for new infrastructure projects, the price of nickel could move significantly higher. Similarly, as other developed economies replace their infrastructure, nickel prices could rise.
There are numerous examples of government policies affecting nickel prices:
Historically, Indonesia has been a leading exporter of nickel. However, the country has also banned laterite ore exports in recent years. The rationale for this policy was a desire by the government to support the domestic smelting industry. Ultimately, budget deficits in Indonesia led to a resumption of exports.
The Philippines, the world’s largest nickel miner, has recently threatened to end all mining in the country.
Actions by these and other governments can have a dramatic effect on nickel supplies and prices.
Nickel occurs in ore bodies, and breaking down these ore bodies to extract nickel expends energy.
Producing nickel requires ample supplies of coal, electricity and crude oil.
Mines and blast furnaces utilize energy to extract nickel ores from the ground and process it into nickel. These costs can have a big effect on primary production. Similarly, the costs of scrap metal can impact the price of secondary production.
What Do Experts Think About Nickel?
Many analysts have a dour view of the nickel market. They cite overproduction from major producers Indonesia and the Philippines as reasons for their pessimism.
“Miners have been holding on as long as they can. They will be close to running out of wiggle room in terms of cutting costs. We need to see some reasonably sized refined capacity cutbacks to restore prices and confidence back to the market.”
Mark Pervan, consultancy AME Group, Sydney
Other experts agree that the current economic fundamentals of the nickel industry are unsustainable.
Consultant Wood McKenzie notes that half of the global nickel miners now operate at a loss, while Citi recently informed its clients that it sees little chance for a rally in prices in the short, intermediate, or long run.
Where Can I Trade Nickel?
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Further Reading
Nickel is an element on the periodic table with an atomic number of 28 and chemical symbol Ni. It is a silvery-white, shiny metal that is strong and resistant to corrosion, making nickel beneficial to add to strengthen metal alloys. Even with these characteristics, all nickel alloy are ductile and malleable. Even though it is the fifth most abundant element on earth there is only about 0.01% in the earth's crust. This because the earth is believed to have an iron-nickel core. Nickel is one of four elements that are ferromagnetic at average room temperature and pressure.
It was isolated and classified in 1751, being mistaken as a copper mineral, and later was used for plating and alloys. In modern times nickel has been primarily used for alloy creation. Over 65% of global nickel production is used for stainless steel with the rest being used for a nickel and copper-based alloy, alloy steel, and batteries to name a few. Some current major nickel producing nations are Indonesia, the Philippines, and New Caledonia.
Nickel like materials have been unintentional used throughout the ancient world. For example, in ancient Egypt artifacts, made of nickel containing meteoric metal, were discovered in graves dating back to about 3500 BC. In Chinese documents dated around 1500 BC, there is reference to a 'white copper', which is believed to be something similar to a nickel-silver alloy.
Nickel was first isolated and classified in 1751 as a chemical element by Axel Fredrik Cronstedt after he initially mistook the ore for a copper containing mineral. The name nickel comes from the Saxon word kupfernickel 'devil's copper' due to miners inability to extract copper from it. Nickel became popular for plating and alloys such as 'nickel silver' (German silver) in the 19th century. Up until recently sulfide ores were mainly used to extract nickel.
Nickel is found in either nickel-copper sulfides or in laterites. Lateritic ores are located on the earth's surface in tropical regions while sulfides are found worldwide underground. Apart from its direct use elemental nickel (along with silver, copper, lead, and others) is one of many pathfinder minerals that are geochemical indicators for gold.
Pentlandite is the most common nickel sulfide and is typically formed during the cooling of sulfide melts caused by host rock contact with magmatic or metamorphic processes, or from meteoric impact. The composition of Pentlandite consists of approximately 34% nickel. Itis found in geological complexes throughout this world which may be the basis for its exclusive use.
Lateritic nickel ores are formed from weathering of ultramafic rocks rich in olivine. Some examples are dunite, komatiite and peridotite along with their serpentinized derivatives, and serpentinite. There are two types of lateritic nickel ores: limonite and silicate types.
Limonite is highly enriched in iron due to strong leaching of magnesium and silica. It consists of goethite, which itself incorporates 1-2% nickel. Because of erosion it is possible that the limonite zone is missing.
Saprolite type nickel ores are found below the limonite zone. They are largely Mg-depleted serpentine containing 1.5-2.5% nickel. In serpentinite, pockets and fissures can contain minor amounts of garnierite with high quantities of nickel content (20-40%).
Historically, nickel sulfides have been the primary source for nickel, but in recent decades there has been a resurgence in lateritic ore mining. Lateritic ore accounts for over 70% of continental nickle resources. With this in mind nations such as Indonesia and the Philippines will play an even larger role in global nickel production in the future and is the basis for why tropical nations are surging at the moment.
Three well known processes to obtain nickel are extractive metallurgy, electrorefining, and the Mond process. Most sulfides have been processed using extractive metallurgy whereby ore is roasted and reduced to yield a metal (matte) of 75% purity. Electrorefining then leaches the resulting matte into a nickel salt solution, from which it is plated onto a cathode.
In the Mond process nickel reacts with carbon monoxide to form nickel carbonyl. To re-obtain nickel the carbonyl passes through a large heated chamber with thousands of nickel pellets. After much stirring nickel decomposes and is deposited on the nickel pellets. Use of a smaller chamber can create nickel powder. This process creates the highest purity of nickel of greater than 99.99%.
In the past 10 years global nickel production has been between 2.0 - 2.5 million tonnes. Of the 23 nations that mine nickel, Indonesia is the main producer of nickel in the world followed by the Philippines, Russia, New Caledonia, and Australia (tied with Canada) round out the top 5 producers in globally. Indonesia and the Philippines close proximity to China fuel China's high demand for nickel. Vale and Nickel Asia are some of the primary nickel producers in Indonesia and the Philippines respectively. Nickel mining in Russia, New Caledonia, Australia, and Canada have supplied the world with nickel for over 50 years and in some cases over 100 years. Some companies which are associated with mining in these countries are Norilsk, Vale, Mincor, and Glencore.
Nickel is considered to be the most widely used metal on the planet being used in over 300,000 products. About 65% of Nickel is used to produce stainless steel. It is used in nonferrous alloys, electroplating, alloy steel, and more. Aside from stainless steel, many specific and recognizable products use nickel such as coinage, alnico magnets, rechargeable batteries, electric guitar strings and many others. The case for using nickel as an alloy is due to both its corrosion-resistance and the stress is can handle at both high and low temperatures.
As of 2014, data shows that China has been the leading nickel consuming nation with over 50% of global nickel consumption. The US comes in second at only 8% of global nickel consumption. Even though China's demand and consumption of nickel far exceeds what it produces, the world's biggest nickel producers are situation in close proximity to China and could help to lower nickel cost. Forecasts show that with growth of the electric vehicle industry there will be a demand for nickel.
Originally, global nickel prices were set by a producer's price list. This was the case until the late 1970s when producers start to lose their pricing power. This was due to three factors. First, advances in technology, including Laterite ore processing, led to the development of new nickel producing mines. Second, nickel shortages and price spikes, due to many mine strikes, caused many consumers to lose trust in producer price lists. Third, market participants noticed that producer price lists were only accurate when demand was high and stock was low. When price was low, producers were forced to undercut their nickel price list to account for the low nickel price and secure contracts. At this point market participants started using LME nickel as a benchmark of nickel value for physical nickel trades.
The London Metals Exchange (LME) is considered the center for trading industrial metals. It is one of the largest commodities markets in the world and the only remaining physical commodities market left in Europe. All other commodity exchanges in Europe have moved to electronic trading. Prices are listed as USD/tonne. Aside from LME nickel, there are many other non-ferrous metals (aluminum, copper, etc) listed on the LME as well as ferrous metals (steel scrap, steel rebar), minor metals (Cobalt, Molybdenum), and precious metals (gold, silver, palladium, and platinum).
Since there are hundreds of LME approved warehouses (where nickel is stored physically on site with fairly transparent stocks), it can provide quotes for nickel prices to investors, as it has the role similar to any of the world's other market makers. This transparency provides and accurate price. These warehouses are close to demand giving buyer immediate access to the metals they purchased. As for LME non-approved warehouses, these warehouse inventories can be hidden or hard to interpret and can result in inaccurate global inventories and thus incorrect nickel prices and future market forecasts.
With the LME being focused towards investment, speculation, and physical delivery or purchase of the metal, investors may avoid the LME. Instead, market participants might invest in nickel company stocks to add to their portfolio rather than investing in the commodity itself. This option is not solely for nickel but can be apply to other metals, commodities, currencies, and cryptocurrencies at markets worldwide. Some listed companies are FPX Nickel, Talon Metals, and Canada Nickel Company. The share prices are much lower than LME nickel unit prices.
The 30 year market price data shows averages near $6 USD/oz while 12 year 3M nickel futures price averages near $7.5 USD/oz. Data from the early 1990's until the early 2000's show that nickel prices were at there lowest in the past 30 years averaging under $5 USD/oz. Looking at nickel prices within the last 12 years, the average nickel price increases to roughly $7.5 USD/oz, similar to that of 3M nickel futures prices.