November 22, 2022

A proposed OPEC-like organization that would aim to control global nickel production and prices is unlikely to gain traction, according to industry analysts. Indonesia discussed the idea with Canadian officials at the G20 summit last week. However, Canadian government officials stated they are “very unlikely” to join such an organization. One Canadian nickel producer echoed similar comments, as Canada has a different supply chain and customer base than Indonesia. AEGIS notes that most of Indonesia’s production is controlled by Chinese companies, as compared to domestic producers in Canada. Moreover, industry analysts note that nickel production is managed by privately held companies and not by governments. Thus, the proposed organization is unlikely to yield little pricing power, compared to OPEC’s influence on oil prices. Indonesia and Canada are the world’s largest and 6^th largest nickel producers, according to USGS data. (Source: Reuters)

Nickel prices have tumbled in recent weeks, largely due to rising COVID cases and poor economic data in China. However, nickel is one of the best-performing LME metals in 2022, with prices up nearly 23% this year. The last trade on the 3M Select contract was $25,500/mt (7:00 AM CST). That said, this still could be a good time for end-users such as stainless-steel producers to hedge future needs by buying swaps. Such positions are standard for consumer hedging; however, they can result in opportunity costs or cash costs if metal prices decrease. Please contact AEGIS for specific strategies that fit your operations. (11/22/2022)

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