Quarterly Report – September 2020

In July, according to Reuters, Elon Musk called for more nickel mines to feed the batteries needed by Tesla and other car manufacturers to power their electric vehicles. However, it is the much larger stainless steel sector that makes all nickel decisions; at current levels, mines are being closed or mothballed rather than new ones being opened.

With only slight improvements in the stainless steel market, it is difficult to see where LME nickel is gaining all its support, other than commodities being a safe haven for speculators in these unpredictable and unprecedented times in which many countries are seeing a resurgence in COVID infection rates. This year, nickel is seeing its first supply surplus since 2015 and this seems to be widening in the third quarter as LME stocks have risen to 236,000 tonnes at the time of writing, up around 24% since January 2020.

The nickel cash average climbed from US$ 13,300 per tonne in July to US$ 14,480 in August and then on to US$ 15,150 in September, giving an average for the third quarter of US$ 14,330. The LME cobalt average, meanwhile, jumped from US$ 28,500 per tonne in July to US$ 32,900 in August, with the average for the third quarter standing at US$ 31,500 at the time of writing.

The superalloy market has witnessed a very slight improvement - but to nowhere near pre-COVID levels. So has this been driven by stockholders replenishing inventories and taking advantage of very attractive discounts on intrinsic values?

The Asian market seems to be ahead of the recovery curve, as opposed to Europe which nevertheless seems to be ahead of the USA. So we have a very long road to recovery and, as it stands, we are still at a very fragile and unpredictable point along this journey.