Nickel surged to a more than three-year high amid growing fears that Russias Norilsk Nickel, top producer of the metal, could be the next victim of US sanctions against Russia that has already caused chaos on aluminum markets. Nickel, used primarily in steel making, jumped as much as 4.6% to $ 14,870 a ton on the London Metal Exchange, the highest level since February 2015. Bullish sentiment was also boosted after production slumped 18% at Brazils Vale, world number two producer. Year to date nickel is the top performing major metal enjoying a 21% rise. Measured from the bottom of the mining cycle early 2016 nickel has nearly doubled in price.
Any sanctions against leading producer Norilsk could crimp output at a time when the market is headed for multi-year deficits thanks to additional demand from the electric vehicle market. Nickel, together with manganese and cobalt, is a crucial elements in batteries favoured by most of the worlds automakers as the industry moves away from the internal combustion engine.
However, only 5% of nickel production is used in batteries and less than 1% in goes into EV power plants at the moment. The industry is still dominated by Chinese nickel pig iron makers using non-battery grade material from Indonesia and the Philippines. Norilsk is said to be in early stage talks with battery makers over possible investment in its mining assets, but is also interested in downstream joint ventures in return.