The futures prices of nickel had surged by 100% in a single day due to the Russia-Ukraine war and market hypes. As one of the essential raw materials for batteries, the hyperinflation of nickel has inhibited recent trends of battery suppliers and downstream NEV manufacturers. CTBC Investments commented that the sensationalization of nickel prices is a temporal occurrence as nickel mine is essentially in oversupply right now, which creates limited impact to the supply chain of batteries, and recommends investors to prepare for battery-related ETFs.
Chan Chia-feng, Manager of CTBC Investments and Energy Storage ETF, commented that the recent surge of nickel prices came from the price sensationalization by certain businesses. The sanctions imposed on Russia have impeded nickel settlement from happening, which resulted in inability in spot settlement for Tsingshan Holding, the largest nickel mine producer in China, and that is when the market starts to circulate rumors about mining giant Glencore short squeezing Tsingshan Holding by elevating prices of nickel. London Stock Exchange has now suspended all nickel transactions, and the latest development indicates that Tsingshan has dispatched sufficient spots for settlement. The incident is expected to conclude from there on.
Chan commented that this wave of nickel inflation has decoupled with the fundamentals. As projected by the S&P 500 Index, nickel metal will exhibit an excess supply status between 2022 and 2025, and long-term prices of nickel mine are expected to be relatively controllable. With most battery producers having signed long-term contracts with nickel miners, they are still holding one to two quarters worth of inventory, and the fluctuation of nickel prices should create limited impact within the short term.
Looking ahead to the subsequent market, Chan pointed out that China remains adherence towards the two targets of emission peak by 2030 and carbon neutrality by 2060, where representatives of multiple leading businesses had also urged the government to accelerate upgrades in the industry chain of lithium batteries the night before the Two Sessions, including excavation of battery materials and battery recycling systems. Multiple midstream and upstream businesses makers such as CATL, EVE, GEM, and Huayou Cobalt have now invested in relevant arrangements, who are relatively optimistic towards the overall industrial dynamics.
Chan emphasized that the drastic surge of raw material prices has prompted partial leading battery assembly plants to integrate upstream raw materials, as well as ensure stable provision and battle inflation risks in raw materials through grasping upstream sources that would serve as a piece of shield for future development. The tendency of “the big gets bigger” is expected to carry on among battery producers in the future.
(Cover photo source: shutterstock)