Nickel is a type of metal. It is extracted from minerals present in the Earth’s crust in concentrated deposits in relatively small areas. It is a malleable metal that is resistant to corrosion, while also being a poor conductor of both heat and electricity. It is strong and ductile, making it ideal for use in various industrial applications. The metal occurs naturally in ore form, and is mineable in around 20 countries worldwide. Nickel futures must generally provide nickel that is of a minimum of 99.8% purity.
Nickel has several appealing features to those commodities traders that trade in futures contracts. The nickel market benefits from a very limited supply as it can only be mined in small areas across the globe. It is also enjoying a rise in demand as it is a hugely important part of the stainless steel industry. The manufacturing of stainless steel accounts for approximately 60% of the nickel output worldwide. In the same vein, around 55% of the total supply of nickel is supplied by only 5 countries, so the lucrative nature of the nickel trade market is readily apparent.
Nickel trading occurs primarily traded at the London Metal Exchange (LME) , where the contract code is NI, but also occurs on other exchanges such as the Multi Commodity Exchange of India (MCX), where it is traded under the ticker symbol NICKEL.
The main consumer and business markets for nickel are in the industrial sector, with nickel regularly being used in engineering and the manufacture of electrical goods. It is also used in the manufacture of car parts and batteries. Stainless steel is however the largest sector that takes advantages of the qualities nickel possesses. Europe is the current highest consumer of nickel, consuming around 430000 tonnes of nickel per year. Asia consumes only slightly less, at around 400000 metric tonnes per year.
Russia is the leading producer of nickel worldwide, producing around 315000 metric tonnes of nickel per year. Australia and Canada are also prolific miners of nickel, whereas Japan is second to Russia in its plant production of the metal.
The nickel commodity price is subject to change based on several factors. Emerging economies play a large part in nickel market trends, as growing economies usually signify an increased demand for stainless steel, and therefore for nickel. The discovery of new mines can cause futures prices to decrease as the market becomes more saturated, but conversely, as mines dry up the price of the metal will increase dramatically. As there are only a small number of countries that export nickel, changes in government policies can cause both spot prices and nickel futures prices to change. This is coupled with the general global economic situation as, for example, the collapse of the Soviet Union led to a surge of nickel exports from Russia, which drove down prices significantly in the West. High nickel prices can also cause nickel pig iron to be used as a substitute. This is manufactured from low grade nickel ore, and is something to be aware of when monitoring the price of nickel futures.
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