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The nickel short squeeze, explained
How prices for a common metal went sky-high.
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What happened to nickel prices?
Russia is one of the world’s largest producers of nickel. When the country invaded Ukraine, fear of supply disruptions sent the price of nickel into a frenzy, so much so that on March 8, the London Metal Exchange had to suspend nickel trading.
At the time, prices for the metal had surged some 250% in just over 24 hours. Nickel trading has since resumed, with prices now in free fall. What happened to the price of nickel is called a short squeeze.
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What is a short squeeze?
Remember the meteoric rise of GameStop stock? Short-selling, as we explained at the time, works like this:
The short investor borrows a stock, let’s say at $10, and sells it. When the stock price drops to $5 the next week, they buy the shares back, return them, and pocket a $5 profit. If the stock instead rises to $15, the short investor either closes the trade for a $5 loss, or pays more interest to keep the trade open. For short-sellers, the risk can be immense—there’s no ceiling on how high a stock can soar, meaning their losses can climb indefinitely.
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Nickel trading, by the digits
$100,000: Price per metric ton that nickel jumped to before trading stopped on the London Metal Exchange
$25,000: Price per metric ton a week before that
$8 billion: Trading losses of Chinese nickel giant Tsingshan Holding Group, which was behind the short squeeze
300 million: The world’s nickel reserves in tons
1453°C: Melting point of nickel
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What is nickel used for?
Nickel, which has a distinct silvery shine, is the fifth-most common element on Earth. Most of the time, it’s alloyed—or mixed with other metals—to make goods that are used throughout the global economy.
- Stainless steel. Most (72%) of nickel is used to make stainless steel.
- Batteries. This includes rechargeables and those that go in electric vehicles.
- Coins. The $0.05 piece in the US is one example.
- Catalyst. Nickel gives glass its green color, and can be used for hydrogenating vegetable oils.
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Which countries are the biggest nickel producers?
Russia is among the top miners of nickel, but Indonesia is the globe’s top producer, followed by the Philippines.
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- How the nickel crisis may impact Africa
- Why the surge in nickel prices is bad for a Chinese nickel giant
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- Kyiv or Kiev? How to pronounce the name of the capital city of Ukraine and why
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