Stockpiles of nickel held at London Metals Exchange-registered warehouses are at their lowest point for six years, and one company may be behind the dip.

It has surged over the past month — going from $US12,015 ($A17,061) per tonne at the start of the month to $14,675 by the end of last week.

The surge was driven by a slump in warehouse stock of the metal — which is now at its lowest level for six and a half years.

However, Reuters thinks it may have found the source of the more recent price growth: Tsingshan Holding Group.

Nickel price had slumped in the second quarter of this year on the back of an expected lack of demand amid all the talk around a US-China trade war.

Nickel, which is a key ingredient in stainless steel, suffered as analysts predicted lower production out of China.

But, counter-intuitively, stainless steel producer Tsingshan started to buy up.

“Tsingshan has been buying on the LME, they are short of nickel because stainless steel production didn’t fall as people thought it would,” one nickel trading source said according to the wire.

Sources said Tsingshan plans to produce 10 million tonnes of stainless steel this year. Analysts say it will need more than 400,000 tonnes of nickel in 2019 compared with the 250,000 tonnes.

It was reportedly worried about a possible export ban from Indonesia, where the government has pledged to keep nickel in the country to make miners process the mineral in Indonesia instead of shipping it out.

“A few weeks ago as stainless production numbers started to filter out, we had a short covering rally. The idea of the Indonesian ban surfaced and Tsingshan and others started buying nickel,” another trading source reportedly said.

Whether the current run is sustainable or not, the longer-term picture for nickel looks rosy.

Analysts say nickel prices need to be higher to incentivise new projects around the world to meet growing demand from the fast-growing electric vehicle sector, which uses rechargeable batteries containing nickel.

 

This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.