Tsingshan Holding Deal Causes Nickel Prices to Decline on London Metal Exchange

Last week, the price of nickel in London declined by more than 8% while the price of the metal over in Shanghai plunged to nine-month lows after an important deal by Tsingshan Holding, a Chinese firm, relieved concerns of supply shortages of battery-grade nickel.

Expectations of a surge in demand from the electric vehicle sector had led to the benchmark prices for the metal trading at six-year highs with many expecting a shortage of the metal as a result.

Earlier in February, Tesla CEO Elon Musk had stated that his company’s top concern was a steady supply of nickel. Prior to this statement, Musk had called for  miners to produce more nickel amid concerns that the supply of this battery metal would experience a deficit by 2023.

As a result of the activity, the London Metal Exchange’s three-month nickel price dropped to $15,945/ton, which is roughly 8.5%. This marks its largest intraday loss since December 2016.

In addition, Norilsk Nickel recently announced that it expects to resolve issues with flooding at its Taimyrsky and Oktyabrsky mines in the coming week.

Over on the Shanghai Futures Exchange, the most-traded nickel contract of June closed at 130,510 yuan/ ton, which was 6% lower. The figure, equivalent to $20,180.61, was the exchange’s largest intraday nickel loss since May of last year.

The top stainless steel producer in the world Tsingshan Holding Group Co. is set to begin supplying nickel matte to battery material producers in China. The company is planning to expand its nickel investments in Indonesia, which is the largest producer of nickel in the world. Matte can be processed into battery-grade chemicals and is an intermediate product manufactured from concentrate.

Huatai Futures said in a statement that the mass production of nickel matte by Tsingshan Holding set off a supply side reform. Huatai noted that this action broke nickel sulphate’s supply bottleneck, adding that there was limited room for the price of nickel to increase. In addition, Mysteel analyst Celia Wang revealed to Bloomberg that the producers of nickel-pig-iron could now manufacture nickel matte by slightly modifying its manufacturing process. This, she said, would considerably alleviate concerns of a shortage of materials needed for batteries.

The decline in the price of nickel triggered a drop in share prices. In China, Ganfeng Lithium Co. dropped by 9.7% and Zhejiang Huayou Cobalt Co. declined by 10%, while in Sydney, IGO Ltd. slumped by nearly 8% and Nickel Mines Ltd. dropped by 10%.

The Tsingshan deal has allayed the supply jitters in the nickel market in much the same way as the exploratory work being done by Excellon Resources Inc. (TSX: EXN) (NYSE American: EXN) (FSE: E4X2) at its Kilgore Project in Idaho has impacted the expected surge in demand for gold. EXN anticipates extracting gold for years to come at this site.

NOTE TO INVESTORS: The latest news and updates relating to Excellon Resources Inc. (TSX: EXN) (NYSE American: EXN) (FSE: E4X2) are available in the company’s newsroom at https://ibn.fm/EXN

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