Nickel Short Squeeze Doubles Value to $100,000 a Ton

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Mar. 8 2022, Published 12:22 p.m. ET

The cost of nickel more than doubled on March 7 as investors piled in for a short squeeze of the commodity. Russian sanctions were a key propellant for the metal’s movement, pushing nickel past the $100,000 per ton mark for the first time ever.

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Here’s what’s causing the nickel short squeeze, whether it will last, and whether you should invest.

The nickel short squeeze is a response to Russian sanctions and high short ratios.

nickel
Source: Getty

Nickel furnace in Norilsk, Russia

Russian sanctions are a key factor behind the nickel short squeeze. The U.S. Geological Survey says Russia is the world’s third-largest producer of nickel. The nation also supplies 17 percent of top-grade nickel around the globe.

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With Western nations placing sanctions on Russia, top industries — including metal production like nickel — are poised to feel the impact on international supply. As a result, investors are piling into nickel while short sellers lose profit. The nickel short squeeze was so strong that the London Metal Exchange (LME) suspended trading for the remainder of the day on March 8.

What is nickel used for?

Nickel is largely used for stainless steel, with two thirds of produced nickel going to that purpose. Another top use for nickel is lithium-ion batteries, a key element of vehicle electrification. As nations continue to set sustainability goals, electric vehicles will become increasingly important to the global economy.

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Other metals aren’t so lucky — but will nickel’s windfall last?

Chief market analyst for XTB Walid Koudmani told reporters, “The market could see a significant supply shock in the near term, which could lead to even further price increases until the situation is stabilized.”

Some metals followed suit on a smaller scale, with the prices of zinc and lead rising marginally. Other metals lost, like aluminum, which sank 6 percent during the same period.

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The geopolitical landscape could mean even investors who are late to the game may still profit from nickel.

What are some of the best nickel producer stocks?

Russia may be a top nickel producer, but it isn't the only one. Canada Nickel (OTC:CNIKF) rose 29 percent this week as of March 8. Indonesian company Vale (VALE) trades on the NYSE and is currently seeing a dip in a more long-term upswing.

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On March 8, Polymet Mining Corp. (PLM) trades on the NYSE American and jumped 30.07 percent in the morning alone. PolyMet is based in Minnesota with corporate headquarters in Toronto.

For those looking to expand beyond nickel pure plays, Tesla (TSLA) is a huge investor in nickel production due to its use of lithium-ion vehicle batteries.

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With nickel the shiniest metal in the ongoing commodity short squeeze, investors must consider the weight of a metal producer’s nickel production versus that of other metals. Heavy involvement in aluminum, for example, may bury any gains.

Should you invest in the nickel short squeeze?

Nickel inventories are historically low. According to the LME, warehouses registered with the exchange currently house 75,012 tons of nickel. This is their lowest point since 2019. At this rate, nickel prices will likely climb further — but placing your investments strategically is key.

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