Nickel's Turnaround: Seizing Opportunities in a Post-Lawsuit Market

The London Metal Exchange (LME) nickel market has emerged from a legal quagmire, with courts dismissing all judicial reviews against its 2022 trade cancellations. This resolution, paired with the UK Financial Conduct Authority’s (FCA) recent fine, has stabilized the regulatory environment while exposing structural shifts in nickel’s supply-demand dynamics. For investors, this presents a rare opportunity to capitalize on nickel’s cyclical recovery—provided they navigate lingering volatility and geopolitical risks with strategic hedging.

Legal Certainty Creates a Strategic Entry Point

The LME’s legal battles concluded in early 2025, with courts affirming its authority to cancel trades during extreme volatility. While the FCA’s £9.245 million fine underscored systemic flaws—such as inadequate price controls and staff training—the LME’s reforms (real-time monitoring, stricter volatility bands) have reduced short-term risks. Hedge funds, once wary of legal liabilities, are now exiting nickel shorts, creating a vacuum for long-term investors.

This departure of speculative capital has lowered liquidity concerns but also driven prices to a 4-year low of $14,084/ton in April 2025 (). The market is now primed for a fundamentals-driven rebound.

Supply-Side Leverage: Indonesia’s Dominance and Strategic Moves

Indonesia, producing 56% of global nickel in 2024, is weaponizing its dominance. Its 2020 raw ore export ban spurred domestic smelting, and now it’s tightening control further. New royalty hikes (14–19%) and production quotas aim to stabilize prices around $20,000/ton, leveraging OPEC-like influence.

• Production Constraints: Major producers like PT Vale Indonesia plan to cut output by 40% in 2025, reducing global supply by over 100,000 tons.
• Geopolitical Play: Indonesia’s collaboration with China on EV battery tech ensures steady demand, while Western governments push for non-Indonesian supply (e.g., Canada Nickel’s Crawford project, which could produce 55,000 tons annually by 2026).

The Philippines’ proposed nickel ore export ban, while minor (4.3% of Indonesia’s needs), adds speculative tailwinds to prices.

Demand Dynamics: EVs, LFP, and Nickel’s Long Game

EV battery demand remains a double-edged sword. While projections suggest a 25% annual growth in nickel demand from EVs by 2028, the rise of lithium-iron-phosphate (LFP) batteries—which eliminate nickel—threatens near-term demand. China’s shift to LFP has cut NMC (nickel-rich) battery share to 19% in early 2025, but this is temporary.

Longer-term, high-nickel cathodes (NMC 811, NCA) will dominate for long-range EVs. The $7,500 U.S. EV tax credit under the Inflation Reduction Act, tied to domestic nickel sourcing, incentivizes projects like Northvolt’s 100,000-ton annual commitment, ensuring demand growth.

Investment Strategy: Nickel ETFs, Producers, and Volatility Hedging

1. ETF Exposure:
2. iPath Bloomberg Nickel Subindex Total Return ETN (JJN): Tracks nickel futures, offering direct price exposure.

3. Global X Nickel ETF (NICK): Invests in nickel miners like Glencore and BHP, benefiting from rising prices.

4. Top Producers:

5. PT Vale Indonesia (TLGYF): Indonesia’s largest producer, with low-cost operations and FCF margins of 22%.

6. Canada Nickel Company (CNI.TO): A Western-friendly play on non-Indonesian supply, with a 55,000-ton capacity by 2026.

7. Volatility Hedging:

8. Pair nickel positions with CBOE Volatility Index (VIX) put options to protect against price swings.
9. Use LME nickel options to set price floors while allowing upside participation.

Risks and Mitigation

• LFP Adoption Surge: Monitor Chinese battery chemistry trends. Diversify into LFP-related materials (lithium, cobalt) if nickel demand falters.
• Trade Wars: U.S. tariffs on Chinese goods (up to 145% effective rates) could weaken stainless steel demand. Hold stainless steel ETFs (SS) as a hedge.
• Overproduction: If surplus reaches 39,000 tons by 2028, consider shorting nickel futures for downside protection.

Conclusion: A Nickel Bottom with Legs

The LME’s legal clarity has removed a major overhang, while Indonesia’s supply controls and EV’s long-term battery needs position nickel for a recovery. Current prices near $15,000/ton—despite short-term LFP headwinds—present a compelling entry point. Pair nickel ETFs/producers with volatility tools to capitalize on this cyclical rebound.

The time to act is now: Buy nickel exposure, hedge the swings, and ride the EV wave.