Great excitement in the financial sector. Trust was not only lost on the London Metal Exchange. Even in the motherland of asset management people were starting to sweat. At the moment it has quietened down once more.

Are professional short sellers still required or is this a relic of turbo capitalism? With rising orders in the industry, nickel is stabilising. The service sector is still the driving growth force.

Inflation rates are falling. Central banks remain true to their course. The LME reopens Asian trading. A lack of environmental protection limits the success story of Indonesian nickel.

Hydrogen should be the answer. In parallel there are still more approaches to decarbonise the industry. E-fuels only if there is no other choice. Efficiency and economy should not be subject of a bet.

Short sellers ride attacks
Since the last edition a tremendous lot has happened in the world. Not only did the dreadful war continue in the Ukraine but then also the Californian Silicon Valley Bank (SVB) caused great commotion. Numerous customers had withdrawn their money, almost driving the financial institution to bankruptcy had regulators and the government not bravely intervened. But this was not all. Only just a few weeks later the banking heavyweight, Credit Suisse (CS) in Switzerland and definitely “too big to fail” was forced to its knees. And once more the responsible overseers had to save this institute by merging it with the even larger UBS as well as far-reaching guarantees from the state.

Unpleasant memories of the financial and sovereign debt crisis of 2008/2009 were brought to mind. Therefore, it was hardly surprising that eventually, even the Deutsche Bank, which in the not too distant past had earned a questionable reputation with headlines similar to those of CS, also became the focus of a short-seller attack by “specialised” investors. In other words speculators gambled that Deutsche Bank would soon meet the same fate as the SVB and CS by selling uncovered shares and questionable transactions on the market for credit default insurances. But the situation of Deutsche Bank was in no way comparable and the question must be asked whether the world actually needs uncovered short selling by professional short sellers.

Inflation rates slowly decline
Anyway, the nervousness and uncertainty in the markets were quite considerable and so, as usual, the US-dollar and the gold price gained while the share markets had to struggle with losses. The sweat on the foreheads of politicians and regulators was clearly seen. At the same time, central banks, seemingly unimpressed, continued on their course of interest rate rises which had begun too late anyway in the battle against inflation. However, this was not without leaving a loop hole in their guidance in case of continuing instability in the financial sector. Further interest rate increases do not come now at any price.

Even though Mr. Draghi, with his bazooka, has long left the stage of the European Central Bank (ECB), and he can personally no longer protect the Euro at any price – Mrs Lagarde now has to do this – his words still have an echo. Through the concerted actions of central banks a little calm has now been restored. Inflation rates are also slowly declining, although to be absolutely clear, it should be said that prices are not rising as quickly as before. This is definitely without thanks to those jumping on the inflation band wagon as they have distinguished themselves by exorbitant price increases in every type of product and service category possible. In addition, the fall in energy prices, especially electricity and gas, accelerated. May the profiteers be left sitting on their stock so that they contribute to the fall in inflation by having to make big discounts.

Nickel stabilises in an uneasy environment
In this probably not easy economic environment, nickel prices, which had previously consolidated, were able to stabilise at lower levels on the London Metal Exchange (LME). Prices were last trading around USD 23,000.00/mt. The real economic situation is also not so bad (any longer) despite multiple crises. First publications of purchasing managers’ indices in Europe for April indicate that there has been an acceleration of growth in the developed economies, with the service sector currently being the main driver. Industry still continues to wobble. New orders are, however, increasing and so prices of input materials should also be well supported. This does, by the way, tally with the current scrap demand.

It is also noticeable everywhere how the bottlenecks are disappearing from supply chains, except for Deutsche Bahn, the German railway company. After some back and forth, the LME was finally able to re-establish nickel future trading during Asian business hours. And so trading once more begins at 1 o’clock British time like it did before the Exchange turmoil at the beginning of March 2022. This is a further step towards normality, together with the hope of the Exchange and market participants that this step will also increase trade volumes again.

Surplus of Class 2 nickel in Indonesia and China
Recently however, the expectations for the LME nickel price in the coming years were corrected downwards by some market analysts, with the justified reference to existing and expected surpluses in nickel production in Indonesia which is dominated by China. The resulting abundant availability reduces price increase fantasies. In actual fact, the surplus mainly concerns Class 2 (not traded on the LME) nickel pig iron (NPI). Class 1, which is traded on the LME, continues to be in short supply, not least because Russia accounts for 26% of the material that can be delivered to the LME warehouses, as Macquarie reported in a recent publication.

As already seen in its own steel and stainless steel production within China, the Chinese initially took the “quantity before profit” approach also in nickel production in Indonesia. In the meantime, however, capacities for the conversion of NPI to Class 1 Nickel, or nickel for battery production have been quickly built, for the discount on LME and SHFE (Shanghai Futures Exchange) prices were no longer sufficient enough for new nickel producers. This should reduce the supply of Class 2 nickel in particular.

Indonesia needs environmental protection
There could also be another reason why the downward correction of price expectations was made too hastily. As Macquarie writes, there are growing concerns amongst nickel consumers regarding the dependence on Indonesia under Chinese control (by 2027 Indonesia could reach a 65% share of global nickel supply). On the other hand, in this context, the subject of ESG (Environment, Social and Government) should not be neglected, for Indonesian mines are located in the middle of rainforests with a unique biodiversity and the carbon footprint is, sadly, one of the worst that primary nickel production can offer.

Should instruments soon take effect, such as the Carbon Border Adjust Mechanism (CBAM) in the EU, then the discussion takes on a totally different spin with regard to prices. It will be difficult to convince consumers in Europe that here, at a high cost, everything should be done for a zero carbon economy, while in emerging countries, the environment and climate are indirectly being damaged. Indonesia also recognises this. Therefore, the President of the country, Joko Widodo, as reported by Reuters, has announced that environmental standards of nickel mines should be monitored more keenly. Owners of exploited sites should be obliged to reforest these abandoned areas. This, and further measures which are to be expected should make production costs in Indonesia more expensive in the future.

Hydrogen should be the answer
Everyone talks about hydrogen as the saviour of the climate. But it is certainly not as simple as politicians of all fractions want us to believe. The last edition already reported on the Handelsblatt conference on the future of steel. In this context it was gratifying to see that the focus of those experts taking part was becoming more and more open, also towards raw materials when it comes to strategies for the decarbonisation of the steel industry. As a speaker and motivator, Oryx Stainless took part at this event and introduced into experts’ discussions multidimensional and multidisciplinary thoughts, which are summarised below. Further details can be found in the presentation published on the Oryx Stainless Group LinkedIn channel (

Therefore, hydrogen is part of the solution, but obviously not the solution. Also, those lobbyists involved with decarbonisation should stay with the facts and not with myths and emotions. The export of steel recycling know-how and steel scrap means the export of climate protection, as the climate and its change is global. The negative external impact created by the production of primary raw materials has to be included in the pricing mechanism if a respective change in behaviour is to come about (cf. also as above in Indonesia). Furthermore, scrap is basically available in any desired quality if the related cost of processing is paid.

The existing capacities of the BOF / Blast Furnace route should, of course, be optimised in regard to emissions. The goal in the long-term, however, must be the maximal technical utilisation of scrap in all types of smelting systems, as the argument that there is not enough scrap available is just too simplistic. What would happen if, in the future, more scrap would be available but the technical capacities are unsuitable for full utilisation? Ultimately, there has to be more scientific research, and also beyond the disciplines of engineering and geology. Environmental economists and business and financial economists should also be included as optimisation and efficiency are also always to be considered under an economic aspect.

“The gamble on hydrogen”
Recently the Frankfurt Allgemeine newspaper Sunday edition (FASZ) also dealt with the topic under the title of “The gamble on hydrogen”. According to this, a reality check should also be urgently made on steel production and the economics and practicalities of the strategies which are being advocated and which are and will be possibly highly subsidised. Even if the article is mainly concerned about hydrogen in e-fuel production for the use in combustion engines and in modern gas heating systems, the findings have to be noted. It has been reported that the International Energy Agency (IEA) has determined that climate friendly hydrogen accounts for only 1% of world production to date. If all the currently planned projects are implemented by 2030, then 24 million tons would be available annually, but 100 million tons would be necessary in order to be climate neutral by the middle of the century.

In Germany and Europe it has to be made aware then that climate friendly hydrogen should best be used in those areas where other technologies based on renewable energy do not work, for the efficiency losses in changing to hydrogen (as in the example of e-fuels) are enormous. As the FASZ writes, the same amount of electricity in an e-car goes five times as far as a combustion engine car which has been fuelled by e-fuels. Also in the future, hydrogen and e-fuels will have to be imported on a large scale from sun- and wind-rich regions.

In this context, the opinions of the former management consultant and blog author, Dr. Daniel Stelter are interesting. In his blog, “Think beyond the Obvious”, he considers whether the immense sums which are being invested (or should be invested) here might be invested elsewhere to achieve more and faster climate protection. Climate is global. The question is, therefore, why Europe should reduce its already low share of global emissions to zero while about the same amount could replace, for example, antiquated technologies on an extensive level. This could save about 50% of global emissions, according to Stelter. Of course, such considerations should not serve in curbing one’s own efforts, but should give more impetus for other lines of thought, which must then be implemented accordingly.

Insight into the decision of the LME to suspend the nickel market
On the 8th March 2022, the 146 year old London Metal Exchange suspended the LME nickel market after prices had shot up to unprecedented heights in the early hours of the morning. On this historic day for commodity trading at least, according to the LME, transactions were cancelled in order to save the market from a total collapse. Some market participants are now suing the LME as they believe that the action of the LME was detrimental to them.

Documents which were filed on the 3rd March 2023 and obtained by the news portal Reuters, give a detailed insight into the decision made by LME CEO Matthew Chamberlain and how it came to a halt in trading. The documents state that on the 8th March 2022, the LME operations team removed the price bands for the nickel contract in the early Asian trading hours and the prices jumped to over 100,000 US-dollar per ton. At this point in time, the CEO of the LME was still sleeping, so that the decision was taken in his absence. After Chamberlain woke up in the early morning, he followed the market on his phone and, after 20 minutes, decided that this was irrational and that trading had to be stopped. Later, between 7.30 a.m. and 7.55 a.m. on the 8th March 2022, during an online meeting of the LME, the decision was taken to suspend trading.

The court documents describe the claim of the plaintiff, the trading house Jane Street Global Trading, that the price increases in early trading were actively supported by the LME operations team, before the LME manually suspended it. Furthermore, the LME explained to the plaintiff that the trading operations team does not concern itself about whether the market is functioning in an orderly fashion. The claim for damages by Jane Street Global Trading against the LME is USD 15.34 million.

LME (London Metal Exchange)

LME Official Close (3 month)
April 11, 2023
  Nickel (Ni) Copper (Cu) Aluminium (Al)  
Official Close
3 Mon.Ask
LME stocks in mt
  March 13, 2023 April 11, 2023 Delta in mt Delta in %
Nickel (Ni) 43,884 42,150 – 1,734 – 3.95
Copper (Cu) 71,300 62,275 – 9,025 – 12.66
Aluminium (Al) 543,525 512,725 – 30,800 – 5.67

Oryx Commodity News

Oryx Commodity News informs about current, industry-relevant topics.