Latest / The Commodities Economy with Fexingo: Oil, Gold, Wheat, and Raw Material Markets / Why Nickel Is the New Copper in the EV Race
Transcript
- Lucas: So, nickel. Not the most glamorous metal, but right now it's the one that's making the electric vehicle story a lot more complicated than the headlines suggest. Luna: You mean because it's not just about lithium and copper anymore? Lucas: Exactly. For years, the narrative was copper is the metal of electrification, and that's true. But nickel has been quietly building a case for itself as the bottleneck we should be watching. London Metal Exchange inventories are at their lowest levels in years, and Indonesia, which supplies more than half the world's nickel, is tightening export controls. Luna: And that's why we saw that crazy short squeeze back in March 2025, right? Lucas: That's the one. Nickel prices doubled in a matter of days. It wasn't just a flash in the pan; it exposed how fragile the market really is when you have a single country dominating supply and exchange inventories low enough to be squeezed. Luna: But what's changed since then? I mean, prices did come back down. Lucas: They did, but the structural story hasn't gone away. Indonesia's dominance isn't new, but the way they're using it is. They've been restricting ore exports and pushing more processing onshore, which means the market is now more dependent on Indonesian intermediate products like nickel pig iron moving into battery-grade nickel sulfate. Luna: That transition from nickel pig iron to nickel sulfate is a big deal, right? It's not just a chemical change, it's a supply chain shift. Lucas: It's a massive shift. Nickel pig iron is a cheaper, lower-grade product used in stainless steel. Battery-grade nickel sulfate requires different processing, more energy, more capital. And that's where the bottlenecks are. Luna: So we're not just short on nickel, we're short on the right kind of nickel. Lucas: Exactly. And that's why the price gap between London and Shanghai has become a battleground for traders. The London Metal Exchange contract is still mostly about Class I nickel for stainless steel, but the market is increasingly looking at battery-grade demand. Luna: And that's why some people are saying nickel is the new copper. Lucas: I think that's an oversimplification, but it captures the sentiment. Copper is still the broader bellwether, but nickel has this concentrated supply risk that makes it more explosive. And when you look at the data we're seeing this week, it's not just nickel. Copper is slightly down over five days, but nickel is up about four percent. Luna: While oil and gold are also rallying. It's like everything is moving at once. Lucas: And that's the point. We're in a macro environment where inflation is cooling, but not in a way that's slowing down the energy transition. The ten-year breakeven inflation rate is flat at two point three four percent, which tells you the market isn't panicking about inflation, but it's still committed to building out the green economy. Luna: So you're saying nickel is a bet on the energy transition, even as the rest of the commodity complex is cooling? Lucas: Partly. But it's also a bet on geopolitics. Indonesia's export controls are a policy choice. They want to move up the value chain, and they have the leverage to do it because they control so much supply. Luna: And that leverage is only growing as automakers and battery makers try to secure long-term supply. Lucas: Which is why we're seeing more and more offtake agreements and direct investments in nickel projects outside Indonesia, from Australia to Canada. The problem is, those projects take years to come online, and they're not cheap. Luna: And in the meantime, the market has to deal with these periodic squeezes. Lucas: Right. And that's what makes nickel such a fascinating commodity to track. It's not just about supply and demand, it's about market structure, financial engineering, and policy decisions. Luna: It's a trader's nightmare and a supply chain manager's headache. Lucas: But for the rest of us, it's a window into how the energy transition is actually going to unfold. It's not a linear path. It's going to be bumpy, and nickel is one of the bumps. Luna: So, beyond the short-term price action, what should a listener who's not a commodities trader take away from this? Lucas: I'd say it's this: the electric vehicle revolution isn't just about the cars. It's about the metals that go into them, and those metals have their own supply chains, their own geopolitics, and their own price shocks. If you're thinking about the future of the economy, you need to be thinking about nickel. Luna: And that's a pretty good reason to keep an eye on a metal that most people never think about. Lucas: And you know, that's why we do this show. We like to make sense of the raw materials that shape our world, without all the noise. And we don't run ads on these episodes. If you want to support that choice, there's a link: buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small way to keep us independent and focused on what we love. Lucas: And that independence matters because commodity markets are full of spin. With nickel, everyone has an angle, from the miners to the automakers to the politicians. We try to cut through that, and listener support helps us stay on that path. Luna: Exactly. Back to nickel: one thing that caught my eye is that the London Metal Exchange is actually considering changes to its nickel contract to reflect this new reality. Have you seen that? Lucas: I have. They're exploring ways to broaden the contract to include more than just Class I nickel, which would be a huge structural change. It would make the contract more relevant to the battery market, but it also comes with risks. Luna: Like what? Lucas: Well, if you include lower-grade nickel, you might create a two-tier market. It could improve liquidity, but it might also reduce the transparency that makes the contract a global benchmark in the first place. Luna: So, a delicate balance. Lucas: It's a delicate balance that will define how nickel trades for the next decade. And it's not just about the exchange. The U.S. and Europe are trying to secure their own supply chains, which is why you see deals like the one between the U.S. and the Philippines for critical minerals. Luna: And that's a direct response to Indonesia's dominance. Lucas: Exactly. So, when you look at nickel, you're not just looking at a metal, you're looking at the future of industrial policy, trade, and energy transition. And that's why I think it deserves more attention than it gets. Luna: Well, I think we've given it its due today. So, what's the one thing you want listeners to remember? Lucas: Just that nickel is a bellwether for the energy transition, and it's going to be volatile. If you see nickel prices spiking, don't just think about traders making money, think about the supply chain that's trying to build the future. Luna: And that future might be just a little bit shinier because of it.