Buying Nickel Call Options to Profit from a Rise in Nickel Prices

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Here Is Why Nickel Prices are Due for a Rebound and How to Profit

Sep 8, 2020 11:46 AM EDT

Like most other commodities, nickel prices have been struggling, especially when compared with the all-time highs reached 10 years ago.

But the outlook for nickel prices looks like it is about to change.

Nickel is mainly used in the production of stainless steel, thanks to its corrosion-resistant properties. This is responsible for 68% of first-use, that is, not recycled, nickel demand.

It is also used in many other ways, such as in rechargeable batteries, because of its toughness and its unique electronic and magnetic properties.

Interestingly the nickel — the U.S. five-cent coin — is just 25% nickel, the rest being copper.

Nickel has been used by humans for more that 5,000 years, making it one of the oldest metals in use.

It is also one of the most common elements in the world. Only iron, oxygen, silicon and magnesium are more abundant.

However, just half of the nickel on Earth is actually mineable and/or economically viable to process.

Nickel prices are at about the same level that they were in 2003, and they have been at $10,000 per metric tonne or less for most of this year. However, nickel prices have climbed about 13% since the beginning of the year.

Nickel prices hit an all-time high in 2007 of $53,750 per tonne. Today’s prices are 82% below that.

They are also 53% below the most recent peak set in May 2020 of $20,966.

The dramatic change in nickel prices comes down to one main reason: China.

In the middle of the last decade, China’s manufacturing sector was booming. As a result, demand, and therefore the price of nickel, exploded.

In 2006, at the peak of China’s commodity boom, nickel prices climbed 146%.

The high demand and high prices inevitably led to a surge in global nickel mining and production. This led to an increase in the global nickel supply.

Then when the global economic crisis began in 2008, China’s demand for nickel, and demand from the rest of the world, fell. With a lot less demand and increasing supply, nickel prices collapsed.

So for a number of years the world has had too much nickel. But things may be about to change.

For five years, nickel supply was higher than demand. For the first half this year, though, there was a nickel shortfall of 36,800 tonnes or about 1.5% of 2020’s global production, and it is likely that this deficit will grow for the rest of the year.

The Philippines is the world’s largest nickel producer and accounts for 21% of global supply. Last year, it produced 530,000 tonnes of nickel, but Philippine nickel production has declined this year, for two main reasons.

First, with falling prices there is less incentive for miners to produce more nickel.

There isn’t much point in mining more nickel if it isn’t as profitable. During the first five months this year, lower production from the Philippines caused the global nickel supply to drop by 5.3%.

The second reason is Rodrigo Duterte, the new president of the Philippines. After taking office on June 30, he began a nationwide environmental crackdown on all mining companies and gave them the option of either strictly following government standards or close down.

Since then, eight of the country’s 27 nickel mines have been suspended. It is forecast that the closures will cut the country’s nickel output by 10%, equating to 2% of global production.

Filipino mines usually produce less nickel from July to January anyway. So the full effect of these closures, and the subsequent impact that they will have on nickel prices, may only be felt next year.

China consumes most of the world’s nickel, with 52% of global demand. Overall, Asia uses 71% of the world’s nickel supply.

A lot of China’s demand is used in the production of stainless steel, and the country’s production of stainless steel grew by 7% in the first half this year.

With more than two-thirds of all nickel production being used for stainless steel manufacturing, China’s increasing stainless steel production will have an impact on the global demand for nickel. This, in part, explains why investment firm Macquarie, and others, has increased its global nickel demand growth forecast to 4.4% from 1.3%.

The blossoming electric-vehicle market will also boost demand for nickel. Projections indicate that electric-car production will triple by 2020.

All these cars will either use lithium-ion batteries, which will increase demand for lithium, or nickel-metal hydride batteries.

Norilsk Nickel, Russia’s largest nickel producer, predicts that the use of nickel in car batteries will more than triple, to more than 100,000 tonnes by 2020 from 30,000 tonnes in 2020, representing about 3.5% of global supply.

More demand and less supply will create a global nickel deficit. Brazilian company Vale, the world’s largest nickel mining company, predicts that the deficit will hit 50,000 tonnes or about 2% of last year’s total production.

As a result of the last 10 years of over-production, the world still has a lot of nickel stockpiled. But the growing deficit will make an impact on stock levels and will help steadily boost prices over the next few years.

Fitch Ratings estimates that the cost per tonne of nickel will average $9,000 this year, climb to $10,500 per tonne in 2020 and average $11,500 per tonne by 2020.

Investors can invest in nickel through exchange-traded products.

Choices are somewhat limited, but the largest is the iPath Bloomberg Nickel Subindex Total Return Exchange-Traded Note (JJN) – Get Report , which provides exposure to nickel prices by investing in nickel futures contacts.

Finance English practice: Unit 34 — Futures

  • Complete the sentences below. Use the key words if necessary.
    • Commodity futures

    are agreements to sell an asset at a fixed price on a fixed date in the future. are traded on a wide range of agricultural products (including wheat, maize, soybeans, pork, beef, sugar, tea, coffee, cocoa and orange juice), industrial metals (aluminium, copper, lead, nickel and zinc), precious metals (gold, silver, platinum and palladium) and oil. These products are known as .

    Futures were invented to enable regular buyers and sellers of commodities to protect themselves against losses or to against future changes in the price. If they both agree to hedge, the seller (e.g. an orange grower) is protected from a fall in price and the buyer (e.g. an orange juiced manufacturer) is protected from a rise in price.

    Futures are contracts — contracts which are for fixed quantities (such as one ton of copper or 100 ounces of gold) and fixed time periods (normally three, six or nine months) — that are traded on a special exchange.

    Forwards are individual, contracts between two parties, traded — directly, between, two companies of financial institutions, rather than through an exchange. The futures price for a commodity is normally higher than its — the price that would be paid for immediate delivery. Sometimes, however, short-term demand pushes the spot price above the future price. This is called .

    Futures and forwards are also used by speculators — people who hope to profit from price changes.

    More recently, have been developed. These are standardized contracts, traded on exchanges, to buy and sell financial assets. Financial assets such as currencies, interest rates, stocks and stock market indexes — continuously vary — so financial futures are used to fix a value for a specified future date (e.g. sell euros for dollars at a rate of €1 for $1.20 on June 30).

    and are contracts that specify the price at which a certain currency will be bought or sold on a specified date.

    are agreements between banks and investors and companies to issue fixed income securities (bonds, certificates of deposit, money market deposits, etc.) at a future date.

    fix a price for a stock and fix a value for an index (e.g. the Dow Jones or the FTSE) on a certain date. They are alternatives to buying the stocks or shares themselves.

    Like futures for physical commodities, financial futures can be used both to hedge and to speculate. Obviously the buyer and seller of a financial future have different opinions about what will happen to exchange rates, interest rates and stock prices. They are both taking an unlimited risk, because there could be huge changes in rates and prices during the period of the contract. Futures trading is a , because the amount of money gained by one party will be the same as the sum lost by the other.

  • British English or American English?
    • aliminium
      • British English
      • American English

    • aluminum
      • American English
      • British English

  • Match the definitions with the words below.
    • 1. the price for the immediate purchase and delivery of a commodity — . . .

      Essential Options Trading Guide

      Options trading may seem overwhelming at first, but it’s easy to understand if you know a few key points. Investor portfolios are usually constructed with several asset classes. These may be stocks, bonds, ETFs, and even mutual funds. Options are another asset class, and when used correctly, they offer many advantages that trading stocks and ETFs alone cannot.

      Key Takeaways

      • An option is a contract giving the buyer the right, but not the obligation, to buy (in the case of a call) or sell (in the case of a put) the underlying asset at a specific price on or before a certain date.
      • People use options for income, to speculate, and to hedge risk.
      • Options are known as derivatives because they derive their value from an underlying asset.
      • A stock option contract typically represents 100 shares of the underlying stock, but options may be written on any sort of underlying asset from bonds to currencies to commodities.


      What Are Options?

      Options are contracts that give the bearer the right, but not the obligation, to either buy or sell an amount of some underlying asset at a pre-determined price at or before the contract expires.   Options can be purchased like most other asset classes with brokerage investment accounts. 

      Options are powerful because they can enhance an individual’s portfolio. They do this through added income, protection, and even leverage. Depending on the situation, there is usually an option scenario appropriate for an investor’s goal. A popular example would be using options as an effective hedge against a declining stock market to limit downside losses. Options can also be used to generate recurring income. Additionally, they are often used for speculative purposes such as wagering on the direction of a stock. 

      There is no free lunch with stocks and bonds. Options are no different. Options trading involves certain risks that the investor must be aware of before making a trade. This is why, when trading options with a broker, you usually see a disclaimer similar to the following:

      Options involve risks and are not suitable for everyone. Options trading can be speculative in nature and carry substantial risk of loss.

      Options as Derivatives

      Options belong to the larger group of securities known as derivatives. A derivative’s price is dependent on or derived from the price of something else. As an example, wine is a derivative of grapes ketchup is a derivative of tomatoes, and a stock option is a derivative of a stock. Options are derivatives of financial securities—their value depends on the price of some other asset. Examples of derivatives include calls, puts, futures, forwards, swaps, and mortgage-backed securities, among others.

      Call and Put Options

      Options are a type of derivative security. An option is a derivative because its price is intrinsically linked to the price of something else. If you buy an options contract, it grants you the right, but not the obligation to buy or sell an underlying asset at a set price on or before a certain date.

      A call option gives the holder the right to buy a stock and a put option gives the holder the right to sell a stock. Think of a call option as a down-payment for a future purpose. 

      Call Option Example

      A potential homeowner sees a new development going up. That person may want the right to purchase a home in the future, but will only want to exercise that right once certain developments around the area are built.

      The potential home buyer would benefit from the option of buying or not. Imagine they can buy a call option from the developer to buy the home at say $400,000 at any point in the next three years. Well, they can—you know it as a non-refundable deposit. Naturally, the developer wouldn’t grant such an option for free. The potential home buyer needs to contribute a down-payment to lock in that right.

      With respect to an option, this cost is known as the premium. It is the price of the option contract. In our home example, the deposit might be $20,000 that the buyer pays the developer. Let’s say two years have passed, and now the developments are built and zoning has been approved. The home buyer exercises the option and buys the home for $400,000 because that is the contract purchased.

      The market value of that home may have doubled to $800,000. But because the down payment locked in a pre-determined price, the buyer pays $400,000. Now, in an alternate scenario, say the zoning approval doesn’t come through until year four. This is one year past the expiration of this option. Now the home buyer must pay the market price because the contract has expired. In either case, the developer keeps the original $20,000 collected.

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      Call Option Basics

      Put Option Example

      Now, think of a put option as an insurance policy. If you own your home, you are likely familiar with purchasing homeowner’s insurance. A homeowner buys a homeowner’s policy to protect their home from damage. They pay an amount called the premium, for some amount of time, let’s say a year. The policy has a face value and gives the insurance holder protection in the event the home is damaged.

      What if, instead of a home, your asset was a stock or index investment? Similarly, if an investor wants insurance on his/her S&P 500 index portfolio, they can purchase put options. An investor may fear that a bear market is near and may be unwilling to lose more than 10% of their long position in the S&P 500 index. If the S&P 500 is currently trading at $2500, he/she can purchase a put option giving the right to sell the index at $2250, for example, at any point in the next two years.

      If in six months the market crashes by 20% (500 points on the index), he or she has made 250 points by being able to sell the index at $2250 when it is trading at $2000—a combined loss of just 10%. In fact, even if the market drops to zero, the loss would only be 10% if this put option is held. Again, purchasing the option will carry a cost (the premium), and if the market doesn’t drop during that period, the maximum loss on the option is just the premium spent.

      Put Option Basics

      Buying, Selling Calls/Puts

      There are four things you can do with options:

      1. Buy calls
      2. Sell calls
      3. Buy puts
      4. Sell puts

      Buying stock gives you a long position. Buying a call option gives you a potential long position in the underlying stock. Short-selling a stock gives you a short position. Selling a naked or uncovered call gives you a potential short position in the underlying stock.

      Buying a put option gives you a potential short position in the underlying stock. Selling a naked, or unmarried, put gives you a potential long position in the underlying stock. Keeping these four scenarios straight is crucial.

      People who buy options are called holders and those who sell options are called writers of options. Here is the important distinction between holders and writers:

      1. Call holders and put holders (buyers) are not obligated to buy or sell. They have the choice to exercise their rights. This limits the risk of buyers of options to only the premium spent.
      2. Call writers and put writers (sellers), however, are obligated to buy or sell if the option expires in-the-money (more on that below). This means that a seller may be required to make good on a promise to buy or sell. It also implies that option sellers have exposure to more, and in some cases, unlimited, risks. This means writers can lose much more than the price of the options premium.   

      Why Use Options


      Speculation is a wager on future price direction. A speculator might think the price of a stock will go up, perhaps based on fundamental analysis or technical analysis. A speculator might buy the stock or buy a call option on the stock. Speculating with a call option—instead of buying the stock outright—is attractive to some traders since options provide leverage. An out-of-the-money call option may only cost a few dollars or even cents compared to the full price of a $100 stock.


      Options were really invented for hedging purposes. Hedging with options is meant to reduce risk at a reasonable cost. Here, we can think of using options like an insurance policy. Just as you insure your house or car, options can be used to insure your investments against a downturn.

      Imagine that you want to buy technology stocks. But you also want to limit losses. By using put options, you could limit your downside risk and enjoy all the upside in a cost-effective way. For short sellers, call options can be used to limit losses if wrong—especially during a short squeeze.

      How Options Work

      In terms of valuing option contracts, it is essentially all about determining the probabilities of future price events. The more likely something is to occur, the more expensive an option would be that profits from that event. For instance, a call value goes up as the stock (underlying) goes up. This is the key to understanding the relative value of options.

      The less time there is until expiry, the less value an option will have. This is because the chances of a price move in the underlying stock diminish as we draw closer to expiry. This is why an option is a wasting asset. If you buy a one-month option that is out of the money, and the stock doesn’t move, the option becomes less valuable with each passing day. Since time is a component to the price of an option, a one-month option is going to be less valuable than a three-month option. This is because with more time available, the probability of a price move in your favor increases, and vice versa.

      Accordingly, the same option strike that expires in a year will cost more than the same strike for one month. This wasting feature of options is a result of time decay. The same option will be worth less tomorrow than it is today if the price of the stock doesn’t move. 

      Volatility also increases the price of an option. This is because uncertainty pushes the odds of an outcome higher. If the volatility of the underlying asset increases, larger price swings increase the possibilities of substantial moves both up and down. Greater price swings will increase the chances of an event occurring. Therefore, the greater the volatility, the greater the price of the option. Options trading and volatility are intrinsically linked to each other in this way. 

      On most U.S. exchanges, a stock option contract is the option to buy or sell 100 shares; that’s why you must multiply the contract premium by 100 to get the total amount you’ll have to spend to buy the call.

      What happened to our option investment
      May 1 May 21 Expiry Date
      Stock Price $67 $78 $62
      Option Price $3.15 $8.25 worthless
      Contract Value $315 $825 $0
      Paper Gain/Loss $0 $510 -$315

      The majority of the time, holders choose to take their profits by trading out (closing out) their position. This means that option holders sell their options in the market, and writers buy their positions back to close. Only about 10% of options are exercised, 60% are traded (closed) out, and 30% expire worthlessly.

      Fluctuations in option prices can be explained by intrinsic value and extrinsic value, which is also known as time value. An option’s premium is the combination of its intrinsic value and time value. Intrinsic value is the in-the-money amount of an options contract, which, for a call option, is the amount above the strike price that the stock is trading. Time value represents the added value an investor has to pay for an option above the intrinsic value.   This is the extrinsic value or time value. So, the price of the option in our example can be thought of as the following:

      Premium = Intrinsic Value + Time Value
      $8.25 $8.00 $0.25

      In real life, options almost always trade at some level above their intrinsic value, because the probability of an event occurring is never absolutely zero, even if it is highly unlikely.

      Types of Options

      American and European Options

      American options can be exercised at any time between the date of purchase and the expiration date. European options are different from American options in that they can only be exercised at the end of their lives on their expiration date. The distinction between American and European options has nothing to do with geography, only with early exercise. Many options on stock indexes are of the European type.   Because the right to exercise early has some value, an American option typically carries a higher premium than an otherwise identical European option. This is because the early exercise feature is desirable and commands a premium.

      There are also exotic options, which are exotic because there might be a variation on the payoff profiles from the plain vanilla options. Or they can become totally different products all together with “optionality” embedded in them. For example, binary options have a simple payoff structure that is determined if the payoff event happens regardless of the degree. Other types of exotic options include knock-out, knock-in, barrier options, lookback options, Asian options, and Bermudan options.   Again, exotic options are typically for professional derivatives traders.

      Options Expiration & Liquidity

      Options can also be categorized by their duration. Short-term options are those that expire generally within a year. Long-term options with expirations greater than a year are classified as long-term equity anticipation securities or LEAPs. LEAPS are identical to regular options, they just have longer durations.

      Options can also be distinguished by when their expiration date falls. Sets of options now expire weekly on each Friday, at the end of the month, or even on a daily basis. Index and ETF options also sometimes offer quarterly expiries. 

      Reading Options Tables

      More and more traders are finding option data through online sources. (For related reading, see “Best Online Stock Brokers for Options Trading 2020”) While each source has its own format for presenting the data, the key components generally include the following variables:

      • Volume (VLM) simply tells you how many contracts of a particular option were traded during the latest session.
      • The “bid” price is the latest price level at which a market participant wishes to buy a particular option.
      • The “ask” price is the latest price offered by a market participant to sell a particular option.
      • Implied Bid Volatility (IMPL BID VOL) can be thought of as the future uncertainty of price direction and speed. This value is calculated by an option-pricing model such as the Black-Scholes model and represents the level of expected future volatility based on the current price of the option.
      • Open Interest (OPTN OP) number indicates the total number of contracts of a particular option that have been opened. Open interest decreases as open trades are closed.
      • Delta can be thought of as a probability. For instance, a 30-delta option has roughly a 30% chance of expiring in-the-money.
      • Gamma (GMM) is the speed the option is moving in or out-of-the-money. Gamma can also be thought of as the movement of the delta.
      • Vega is a Greek value that indicates the amount by which the price of the option would be expected to change based on a one-point change in implied volatility.
      • Theta is the Greek value that indicates how much value an option will lose with the passage of one day’s time.
      • The “strike price” is the price at which the buyer of the option can buy or sell the underlying security if he/she chooses to exercise the option. 

      Buying at the bid and selling at the ask is how market makers make their living.

      Long Calls/Puts

      The simplest options position is a long call (or put) by itself. This position profits if the price of the underlying rises (falls), and your downside is limited to loss of the option premium spent. If you simultaneously buy a call and put option with the same strike and expiration, you’ve created a straddle.

      This position pays off if the underlying price rises or falls dramatically; however, if the price remains relatively stable, you lose premium on both the call and the put. You would enter this strategy if you expect a large move in the stock but are not sure which direction.   

      Basically, you need the stock to have a move outside of a range. A similar strategy betting on an outsized move in the securities when you expect high volatility (uncertainty) is to buy a call and buy a put with different strikes and the same expiration—known as a strangle. A strangle requires larger price moves in either direction to profit but is also less expensive than a straddle. On the other hand, being short either a straddle or a strangle (selling both options) would profit from a market that doesn’t move much.   

      Below is an explanation of straddles from my Options for Beginners course:

      Straddles Academy

      And here’s a description of strangles:

      How to use Straddle Strategies

      Spreads & Combinations

      Spreads use two or more options positions of the same class. They combine having a market opinion (speculation) with limiting losses (hedging). Spreads often limit potential upside as well. Yet these strategies can still be desirable since they usually cost less when compared to a single options leg. Vertical spreads involve selling one option to buy another. Generally, the second option is the same type and same expiration, but a different strike.

      A bull call spread, or bull call vertical spread, is created by buying a call and simultaneously selling another call with a higher strike price and the same expiration. The spread is profitable if the underlying asset increases in price, but the upside is limited due to the short call strike. The benefit, however, is that selling the higher strike call reduces the cost of buying the lower one.   Similarly, a bear put spread, or bear put vertical spread, involves buying a put and selling a second put with a lower strike and the same expiration. If you buy and sell options with different expirations, it is known as a calendar spread or time spread. 


      Combinations are trades constructed with both a call and a put. There is a special type of combination known as a “synthetic.” The point of a synthetic is to create an options position that behaves like an underlying asset, but without actually controlling the asset. Why not just buy the stock? Maybe some legal or regulatory reason restricts you from owning it. But you may be allowed to create a synthetic position using options.   


      A butterfly consists of options at three strikes, equally spaced apart, where all options are of the same type (either all calls or all puts) and have the same expiration. In a long butterfly, the middle strike option is sold and the outside strikes are bought in a ratio of 1:2:1 (buy one, sell two, buy one).

      If this ratio does not hold, it is not a butterfly. The outside strikes are commonly referred to as the wings of the butterfly, and the inside strike as the body. The value of a butterfly can never fall below zero. Closely related to the butterfly is the condor – the difference is that the middle options are not at the same strike price. 

      Options Risks

      Because options prices can be modeled mathematically with a model such as the Black-Scholes, many of the risks associated with options can also be modeled and understood. This particular feature of options actually makes them arguably less risky than other asset classes, or at least allows the risks associated with options to be understood and evaluated. Individual risks have been assigned Greek letter names, and are sometimes referred to simply as “the Greeks.” 

      Below is a very basic way to begin thinking about the concepts of Greeks:

      Nickel Price

      For most people who aren’t interested in chemistry or manufacturing, nickel doesn’t really mean all that much. Isn’t it just 5 cents in value? But the truth of the matter is that this metal is widely used in society today. While it is used in the nickel coin (which is actually just 25% nickel and 75% copper), it is also used in buildings, transport, electrical power generation, medical equipment, food preparation, and mobile phones. It’s just about everywhere.

      In fact, it’s one of the oldest metals known to man. People have used it for more than 5,000 years although they probably weren’t aware of it at the time. It was only in medieval times in Germany that people suspected its existence, when they were unable to extract copper from a red ore they found. They blamed a mythological sprite named Nickel, (which is like Old Nick, or the devil) and they called the ore Kupfernickel as “kupfer” is copper in German.

      Then in 1751, a baron in Sweden tried to extract copper from kupfernickel, and instead produced a white metal. This he named nickel.

      Below is the historical Nickel price per metric ton.

      Year Price Price (Inflation Adjusted) Change
      1980 $6,518.67 $20,093.57 0%
      1981 $5,953.10 $16,636.65 -10%
      1982 $4,837.50 $12,729.73 -23%
      1983 $4,672.75 $11,914.92 -4%
      1984 $4,752.24 $11,618.03 2%
      1985 $4,899.03 $11,560.71 3%
      1986 $3,888.77 $9,005.60 -26%
      1987 $4,872.21 $10,890.97 20%
      1988 $13,778.14 $29,585.59 65%
      1989 $13,313.04 $27,277.57 -3%
      1990 $8,864.00 $17,231.28 -50%
      1991 $8,163.22 $15,229.36 -9%
      1992 $7,015.48 $12,706.92 -16%
      1993 $5,308.17 $9,334.49 -32%
      1994 $6,331.93 $10,852.61 16%
      1995 $8,223.56 $13,710.87 23%
      1996 $7,504.09 $12,146.91 -10%
      1997 $6,924.72 $10,957.07 -8%
      1998 $4,623.59 $7,200.75 -50%
      1999 $6,002.51 $9,147.04 23%
      2000 $8,630.52 $12,719.33 30%
      2001 $5,969.63 $8,558.18 -45%
      2002 $6,783.31 $9,571.54 12%
      2003 $9,630.29 $13,283.24 30%
      2004 $13,821.01 $18,562.40 30%
      2005 $14,777.82 $19,194.82 6%
      2006 $24,125.61 $30,364.93 39%
      2007 $37,135.84 $45,466.77 35%
      2008 $21,141.47 $24,936.68 -76%
      2009 $14,672.40 $17,375.82 -44%
      2020 $21,810.00 $25,421.79 33%
      2020 $22,909.14 $25,874.95 5%
      2020 $17,541.74 $19,405.18 -31%
      2020 $15,029.99 $16,380.90 -17%
      2020 $16,893.38 $18,121.82 11%
      2020 $11,862.64 $12,712.55 -42%
      2020 $9,595.18 $10,051.45 -24%
      2020 $10,972.27 $11,235.60 13%
      2020 $8,931.76 $8,931.76 -23%

      Price History of Nickel

      Demand for nickel increased when it started being used in steel production in 1889. During the non-war years it was used extensively for coins. But during WW II it was no longer used for coins because the metal was crucial in the production of armor.

      Nickel prices are known for its high volatility, and it has exhibited a boom/bust cycle through the years. It boomed in the 1960s and 1970s, but prices have dropped considerably since then.

      Its decline in prices has been noticeable in recent weeks, because prices of copper and aluminum have gone up from the depths reached during the global financial crisis. The problem is that while there is a lot of demand for nickel, the supply of the metal is too great. Too many regions have large stockpiles of the metal.

      Yet despite the low price of the metal, major producers are still showing a profit for their efforts. This is partly because producing this metal requires very low energy costs. In addition, these producers are reluctant to cut down on their output because they’re afraid of losing market share to their competitors.

      Some have hoarded the metal because of Indonesia’s decision in 2020 to cease exporting it, and some mining execs even thought it could reach $15 to $20 per pound by the middle of 2020. But it never did. Right now, the price is $3.97 per pound.

      Indonesia is the 5 th largest producer, with the top spots going to Russia, Canada, New Caledonia, and Australia. The US produces a measly 15,070 tons a year with its only mine in Oregon. In contrast, Russia produces 230,000 tons a year.

      Nickel as Investment

      If you’re bullish about this metal, you can use it as a hedge against the US dollar. You can even buy it in bars or bullion, but that’s not generally recommended. Its low value compared to its density means that you’ll have to spend too much for storage.

      You can also trade futures contracts, in anticipation of a rise in the price. Or you can also invest in the stocks of companies that mine the metal. These companies can survive because they have generally low costs in producing this metal.

      Purposes Used For

      The main reason why so many people and organizations hoard and sell nickel is because it is used extensively in numerous industries. Essentially, it is part of stainless steel which is usually 8-12% nickel. That means it is part of an alloy, and 60% of the world’s supply is used as an alloy with steel. Another 14% is for an alloy with copper. A nickel coin is an example of this, as it is made of mostly copper with 25% nickel. It is very popular for steel and currency because it is highly resistant to corrosion.

      Obviously, as part of stainless steel it is widely used. This material is used for just about everything, including household appliances, medical equipment, and heavy machinery. This material is used in the textile, pulp and paper, pharmaceutical, chemical, petroleum, and food and beverage industries.

      It’s also used in superalloys, which contain titanium, aluminum, tungsten, chromium, iron and cobalt. These are extremely resistant to corrosion, and they still retain their properties even in very high temperatures.

      It’s also used in electroplating, so that it a thin layer of nickel is laid on top of another layer of metal. For example, steel is strong but it can rust. But with nickel-plating, the nickel protects the steel from corrosion.

      Finally, it is also used with cadmium to make batteries for various handheld tools and mobile devices.

      The demand for nickel will not cease for the foreseeable future. It’s only because there’s an oversupply of the metal which has caused its price to stagnate. It’s inherent value to society, however, is undeniable.

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