LME price soars as Russia invades Ukraine

Market headlines in February were dominated by heightened concerns that escalating tensions between Russia and Ukraine could trigger sanctions that would disrupt nickel exports from leading mined and primary nickel producer Russia. The London Metal Exchange three-month, or LME 3M, nickel price increased from $22,764 per tonne at the start of the month to an 11-year high of $25,575/t in trading Feb. 24, as Russia launched a large-scale invasion of Ukraine. Western governments responded by imposing sanctions on several Russian financial institutions and individuals close to Russian President Vladimir Putin. While they have not yet imposed sanctions on Russia's commodity exports, the possibility remains.

* LME nickel stocks fell 11.6% month over month to 82,314 tonnes Feb. 22, as market participants attempted to stockpile the metal ahead of possible sanctions on Russian primary nickel exports.

* Prior to the invasion, S&P Global Ratings believed there was a low likelihood that "very harsh sanctions" would be imposed on Russian commodity exporters such as Norilsk Nickel; however, the possibility remains.

* We have not yet incorporated any Russia sanctions-related curtailments in our global primary supply forecasts and forecast Russia's primary nickel production to rise 10.6% year over year to 134,000 tonnes in 2022.

* China's Tsingshan Holding Group Co. Ltd. has started to deliver material from its nickel matte operation to Zhejiang Huayou Cobalt Co. Ltd., a China-based battery materials producer.

* We expect continued growth of Indonesian primary output and moderating global demand to move the global primary nickel market to a 34,000-tonne surplus in 2022 from an estimated 181,000-tonne deficit in 2021.

* This will lower the LME 3M nickel price from its current high levels to an average of $22,532/t for 2022, according to our expectations.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.