So far this week, metals prices are shooting up much like last week’s oil surge. For example, high market anxiety pushed gold prices to a one-and-a-half year high of more than $2,000 yesterday. Meanwhile, silver prices spiked as well. However, the biggest story of the day may be the recent short squeeze that has been sending nickel stocks shooting up. The metal’s prices have set a record for the London Metal Exchange (LME), although trading has since been halted.
While investors struggle to make sense of these recent price swings, some nickel stocks are riding the wave. Talon Metals (OTCMKTS:TLOFF) is in the green for the day so far. Canada Nickel (OTCMKTS:CNIKF) is up more than 2.5% as of this writing, too. Right now, the sector’s winner appears to be Polymet Mining (NYSEAMERICAN:PLM), which is currently up by roughly 30%.
Other names haven’t been so lucky. Glencore (OTCMKTS:GLNCY) has been fluctuating today. Meanwhile, Brazil-based Vale (NYSE:VALE) is down nearly 4% right now. Both companies boast sufficiently larger capitalizations than their smaller, aforementioned peers.
What’s Happening with Nickel Stocks?
Early this morning, nickel prices surpassed $100,000 per metric ton. This was a gain of roughly 250% over the past 48 hours. Although this is the largest spike that the LME has ever seen, the exchange was quickly forced to halt trading. As Bloomberg reports, the “unprecedented price spike left brokers struggling to pay margin calls against unprofitable short positions.”
These initial price spikes were driven by supply concerns. Russia is one of the world’s largest nickel exporters, providing nearly 7% of the global supply. Now with the Russia-Ukraine conflict, the companies behind that supply are facing sanctions. Having previously sold the metal, both investors and industrial users were sent scrambling to buy their contracts back.
Nickel producers based closer to home are set to profit if Russia is blocked by further sanctions, however. For that reason, miners based in the U.S. and Canada are seeing shares rise steadily today.
Talon made headlines earlier this year when it partnered with Tesla (NASDAQ:TSLA) to supply nickel to the leading electric vehicle (EV) producer. After the deal, InvestorPlace contributor Alex Sirois named both CNIKF and PLM in a list of top nickel stocks. As Sirois notes, the metal is “vitally important” to EV production. This means that other electric vehicle companies will be looking to source the metal as well.
The current Russia-Ukraine conflict has not only driven up oil and gas prices as well as nickel. Rather, with more consumers pushed toward EVs to avoid rising gas costs, demand for EV battery components overall should only increase.
What It Means
It’s clear that, regardless of how things are settled in Ukraine, demand for nickel is going to keep rising. Prices can be expected to ultimately stabilize, as they do after major market shifts. That does not mean nickel stocks are going to start falling, however. While some metal prices may subside along with Wall Street anxiety, EV component demand will likely continue to grow.
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On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
