Nickel is a powerhouse in the commodities market. Traditionally driven by stainless steel, it is also trying to establish itself as a critical component of the green energy transition. For traders, it offers significant volatility and a clear long-term technical structure, but requires a nuanced understanding of the global supply chain and market mechanics to be traded with confidence.
Trading Nickel through Contracts for Difference
Before diving into the specifics of nickel, a solid understanding of how CFDs work and how they differ from buying futures contracts is required. These are some of the key features of trading through a CFD:
- A CFD is a cash-settled derivative. This means you never physically buy, sell, or take delivery of any goods. You are speculating on a contract designed to track the prices of nickel futures in major markets. Using a CFD thus allows you to speculate on prices without ever having to worry about rolling over a futures contract or undertaking physical delivery.
- CFDs allow you to use leverage, enabling you to use your capital more effectively. Using leverage wisely allows you to hold multiple positions at a time without tying up all your capital in just one asset. It also allows you to size up positions and potentially make significant profit from intraday swings that would otherwise achieve only a small percentage gain. Leverage is a tool; when used wisely, it can amplify potential returns, but if used without understanding, it can also increase the size of losses.
- Unlike a physical investment, holding a CFD position past the daily market close typically incurs an overnight financing charge (or 'swap fee'). This cost makes holding positions for extended periods less profitable. Therefore, the strategies discussed below are suited more for short to medium-term trades instead of longer-term investments.
How is Nickel Made
Producing Nickel isn’t as simple as just mining and smelting it, so we’ll give a quick overview of what the production cycle looks like:
First off, Nickel is extracted from two types of ores: sulfide and laterite. Sulfide is typically found underground in temperate climates, whereas laterite tends to be found on the surface in tropical areas. Once the base ore is mined, it is crushed and ground to a smaller size, after which it is mixed with water.
After this, the two different ores go through different production processes, due to their changing chemical composition, but in essence, they get processed and smelted to increase the nickel concentration until the desired end-product is achieved.
For Nickel CFDs, only 99.8% nickel concentration is accepted. However, lower concentration metals still have industrial use cases, but they are just not represented in financial markets.
Supply and Demand Fundamentals
Geographical Distribution
In recent years, Indonesia has become a major powerhouse in producing Nickel. Due to a ban from the Indonesian government against the export of raw ores, Indonesian producers have been forced into refining the base material themselves. This policy has turned Indonesia from a country with big reserves that used to export most of its ores, to now being the global powerhouse for Nickel, accounting for 48,6% of the total supply.
Beyond Indonesia, major producers include the Philippines (10%), Russia (6.7%), and New Caledonia (5.8%).
The Demand Equation: Steel vs. Batteries
When we look at what actually drives buying pressure, we can split demand into two distinct camps. On one hand, you have the traditional, cyclical demand coming from the stainless steel industry. On the other hand, you have the "green transition" narrative via batteries.
Right now, the market is still dominated by stainless steel, more specifically, stainless steel destined for the Chinese market. Because of this, nickel’s behaviour is strongly linked to the strength of the Chinese economy. To get a read on this, you have to look at the specific grades of steel being produced, as the interplay between them helps to absorb demand-side shocks:
- 300-series (8-10% Nickel): This is the premium grade, which naturally sees the highest demand.
- 200-series (1-4% Nickel): Think of this as the budget version. It uses manganese as a cheaper substitute for nickel. When nickel prices get too high, demand often shifts here.
- Scrap Utilization: We also have to watch the scrap market. If there is plenty of stainless steel scrap available, mills don't need to buy as much virgin nickel. High scrap ratios can dampen demand even if steel output is actually rising.
Then there is the EV angle. While electric vehicles were supposed to be the "super-cycle" for Nickel, reality has been a bit more complicated. Lithium Iron Phosphate (LFP) batteries, which contain zero nickel, have eaten away a massive chunk of market share in the green transition. Nickel-rich batteries are now mostly used exclusively in high-performance vehicles, leaving them with a relatively smaller slice of the pie than many bulls expected.
While stainless steel helps to create significant demand and is seen as the reason for a ‘hard price floor’ in Nickel, the lack of demand in the Green transition caused long-term bearish expectations for Nickel. Globally, producers have invested strongly in their production capacity, expecting a big role for Nickel in the green transition, but as those expectations fell away, the market is now forecasted to stay in a supply surplus for the coming years, which is a strong bearish force on prices.
Market Architecture
London Metals Exchange
The benchmark price for nickel is determined on the London Metals Exchange (LME). However, the LME operates with a unique structure designed for producers to hedge their daily exposures, making it quite different from other futures contracts.
The LME offers daily delivery dates out to 3 months, weekly dates out to 6 months, and monthly dates out to 63 months. This granularity allows physical merchants to hedge a specific cargo arriving on a specific day. However, speculative traders focus mostly on the three-month contracts, which are similar to standard futures exchanges like ones offered by CME or EUREX. The reason for concentrating their behaviour on these contracts rather than the daily or weekly structure is that activity is concentrated on these contracts, which allows speculative traders better liquidity.
On the other hand, a so-called cash price is also often mentioned, and refers to the price for physical delivery in two business days.
The 2022 Short-Squeeze
During the outbreak of the Russia-Ukraine war, concerns emerged over potential sanctions on Russian nickel, one of the world’s major producers. This triggered a large short position held by the Chinese company Tsingshan, leading to a short squeeze. As prices rose, Tsingshan had to close its short positions. Closing a short means buying nickel, which pushed prices higher, forcing more short positions to be closed, creating a cycle of rising prices and continued buying.
This short squeeze caused an increase from $20,000 to $100,000 in just 48 hours and saw the LME suspend trading on Nickel to prevent the whole market from breaking.
This pause was very heavily scrutinized by market participants, and the LME has since then implemented two measures to prevent anything like this from happening again:
- A 15% circuit breaker, which essentially pauses trading activity when the last price differs more than 15% from the previous day’s close.
- Members of the LME are required to report Over-The-Counter (OTC) positions to the LME. OTC Transactions are exactly what allowed Tsingshan to accumulate such a highly leveraged position without significantly altering prices.
The China - London Interplay
While the LME is the global benchmark (and the market on which CFD prices are based), the Shanghai market is still extremely important for overall demand in the sector. Furthermore, there are arbitrage opportunities that occur when prices between the two venues significantly differ, and monitoring this relationship is key to understanding how Nickel moves, and might also prevent you from getting on the wrong side of a trade.
However, to assess the spread between the LME and SFE, we need to account for changing exchange rates, duties, and VAT. To correct LME prices to the SFE equivalent, we need to use the following formula:
$Adjusted LME Price = LME Price \times Exchange Rate \times (1 + VAT) \times (1 + Duty)$
Calculation as of November 2025
$Adjusted LME Price = 3,041.50 \times 7.10729 \times (1 + 0.13) \times (1 + 0.03) = 25,159.82 RMB$
Note that the original price of the LME contract is priced in USD, and is the price for one tonne. We can then compare this calculated price to the true price on the Shanghai Futures Exchange, where the price of Nickel comes out at 24,090 RMB/tonne for the 3-month benchmark contract. This translates to a 4.2% difference between the LME and SFE prices.
However, producers also need to pay for shipping costs and carry costs on their exchange rates, so it’s likely that this 4.2% discount of the LME contract relative to the SFE contract is just too small to create enough financial incentive for market participants to execute this arbitrage. However, keeping track of these price changes will allow you to see at which discount market participants start stepping in to arbitrage the spread.
Also, keep in mind that the VAT and Duties are prone to being changed in the future, so make sure to always double-check that you’re using the correct numbers.
Strategic Indicators
Tracking Physical Inventory
A crucial component of assessing Nickel’s future behavior is looking at physical inventories in the LME warehouses. Using the website of the LME, we can take a look at the ‘Stocks breakdown report’, which is a two-day delayed stock breakdown, posted on a daily basis.
| Country/Region |
Location |
Opening Stock |
Delivered In |
Delivered Out |
Closing Stock |
Open Tonnage |
Cancelled Tonnage |
| Belgium |
Antwerp |
0 |
0 |
0 |
0 |
0 |
0 |
| Germany |
Hamburg |
0 |
0 |
0 |
0 |
0 |
0 |
| Hong Kong SAR |
Hong Kong SAR |
636 |
0 |
0 |
636 |
636 |
0 |
| Italy |
Genoa |
0 |
0 |
0 |
0 |
0 |
0 |
| Italy |
Leghorn |
0 |
0 |
0 |
0 |
0 |
0 |
| Italy |
Trieste |
0 |
0 |
0 |
0 |
0 |
0 |
| Korea (South) |
Busan |
66.846 |
0 |
0 |
66.846 |
66.486 |
360 |
| Korea (South) |
Gwangyang |
12.654 |
0 |
0 |
12.654 |
12.654 |
0 |
| Korea (South) |
Incheon |
0 |
0 |
0 |
0 |
0 |
0 |
| Malaysia |
Johor |
3.162 |
0 |
0 |
3.162 |
3.162 |
0 |
| Malaysia |
Port Klang |
7.818 |
0 |
0 |
7.818 |
7.764 |
54 |
| Netherlands |
Amsterdam |
0 |
0 |
0 |
0 |
0 |
0 |
| Netherlands |
Moerdijk |
0 |
0 |
0 |
0 |
0 |
0 |
| Netherlands |
Rotterdam |
32.676 |
0 |
72 |
32.604 |
32.148 |
456 |
| Netherlands |
Vlissingen |
0 |
0 |
0 |
0 |
0 |
0 |
| Singapore |
Singapore |
76.752 |
0 |
0 |
76.752 |
75.642 |
1.110 |
| Spain |
Barcelona |
0 |
0 |
0 |
0 |
0 |
0 |
| Spain |
Bilbao |
0 |
0 |
0 |
0 |
0 |
0 |
| Sweden |
Helsingborg |
0 |
0 |
0 |
0 |
0 |
0 |
| Taiwan |
Kaohsiung |
51.348 |
0 |
408 |
50.940 |
42.714 |
8.226 |
| UAE |
Dubai |
1.950 |
0 |
0 |
1.950 |
1.950 |
0 |
| UK |
Liverpool |
0 |
0 |
0 |
0 |
0 |
0 |
| USA |
Baltimore |
108 |
12 |
0 |
120 |
18 |
102 |
| USA |
Chicago |
0 |
0 |
0 |
0 |
0 |
0 |
| USA |
Detroit |
0 |
0 |
0 |
0 |
0 |
0 |
| USA |
Los Angeles |
0 |
0 |
0 |
0 |
0 |
0 |
| USA |
Mobile |
0 |
0 |
0 |
0 |
0 |
0 |
| USA |
New Orleans |
0 |
0 |
0 |
0 |
0 |
0 |
| Total |
|
253.950 |
12 |
480 |
253.482 |
243.174 |
10.308 |
| +/- Change |
|
-222 |
|
|
-468 |
|
|
LME Stock Breakdown Report for Nickel, November 21st, 2025
While the overall total inventory is the headline number, it is just as important to track changes in stocks as prices evolve. Advanced strategies can also incorporate our earlier calculations of the adjusted LME price and create a pricing model that tries to take into consideration shipping costs based on the location of the stocks, and thus creates a more complete depiction of when arbitrage of the SFE’s or LME’s prices becomes financially attractive.
Finally, it’s important to understand the columns of ‘Open tonnage’ and ‘Cancelled tonnage’. Open tonnage refers to the quantity of metal that is available for immediate delivery, while cancelled tonnage is the opposite, signaling cancelled orders.
Sudden spikes in cancelled warrants (cancelled tonnage) can precede a price rally, as it means that buyers are accepting their physical delivery now, rather than in the future, which essentially reduces the remaining available physical supply.
The EU Carbon Border Adjustment Mechanism (CBAM)
Currently, there’s a huge discrepancy between the carbon emissions from Nickel produced in Canada or Australia versus nickel produced in Indonesia. Most Indonesian plants use coal as an energy source, which leads to the carbon footprint being 3-7 times as much as their Australian and Canadian counterparts.
Because of this dynamic, the European Union has integrated legislation to combat the production of highly polluting Nickel. It will essentially act as a tariff on high-carbon nickel, making Canadian and Australian nickel comparatively cheaper for the European market.
This creates a spread between the so-called ‘green’ and ‘Dirty’ nickel. This regulation is currently in a transitory phase, where importers are required to report their embedded emissions. From January 1st, 2026, however, importers will need to purchase CBAM certificates to cover the carbon emissions embedded in their imported goods.
Even though the United Kingdom (where the LME is located) isn’t a part of the European Union, and thus not subject to this regulation, it could still be expected that this regulation will work as a bullish factor on LME prices. This relationship is quite complicated, however, so it should be traded with caution.
Long-Term Technical Analysis
Let’s now take a look at the price behavior of the Nickel.
Nickel prices on a Monthly Timeframe, using a logarithmic scale
Taking a look at this chart, we can see that prices have been very rangebound. Compared to indices or precious metals, which in the long-term are always expected to go up, Nickel prices have been oscillating throughout their whole history.
We can see very clear absolute highs and lows, with a supply area at $48,200-52,800 and a demand area at $7,560-8,900. These are our clear extremes; however, prices aren’t anywhere near those levels right now, and historically, prices have spent very little time there.
Nickel prices on a Monthly Timeframe, using a logarithmic scale
A Volume Profile, which looks at all of the available price action, shows us a clear and relatively small Volume Value Area between $14,800 and $20,900. These prices have likely shifted by the time you’re reading this, so we recommend reanalyzing the charts yourself. However, we know that when the price is inside its Volume Value Area (VVA), prices are very likely to stay inside a ranging environment. From a higher-timeframe bias, it thus would make more sense to trade mean-reversion strategies rather than trend-following approaches when prices are within the VVA.
However, if the price moves outside the VVA, it is likely to enter a trending phase. Prices are then expected to move aggressively until a new value area is established.
Conclusion
In this article, we’ve shared all the information you need to start trading nickel effectively. A combination of high Indonesian production, limited demand from the green transition, and technical analysis all suggest that prices are likely to experience a structural decline in the near term, from 2025 to early 2026.
However, the metaphorical ‘invisible hand’ in economics teaches us that free markets automatically balance their prices through individuals’ self-interested actions. For example, if the near-term bearish bias does prove to be correct, there will come a price point where certain manufacturers stop their production, which in turn supports prices by reducing supply. Conversely, if lithium-based batteries become expensive, the demand for nickel could increase.
Because of this constantly changing environment, it is always important to stay up-to-date on all the factors that influence the market you’re trading, and try to understand the complex interplay and how they will influence prices.
Stay informed on the factors shaping nickel and metals markets to make better trading decisions.