Nickel Drops 12% in June as LME Inventories Keep Climbing

Nickel spot prices fell to $16,733 per metric ton on June 29, down 12% from $19,004 a month earlier. The drop extended a slide that has pushed the metal to its lowest level since early 2024.

The June decline hit every major nickel producer. BHP Group, which runs the Nickel West operation in Western Australia, and Vale S.A., with its Sudbury and Thompson mines in Canada, both saw their revenue outlooks tighten. The analyst who compiled the June nickel miners report holds long positions in both BHP and VALE, along with Electra Battery Materials and Centaurus Metals. That disclosure signals a contrarian bet against the prevailing bearish sentiment.

That bet rests on a simple question: is the price drop a structural shift or a cyclical overshoot? The market has been flooded with low-cost nickel from Indonesia, where Chinese-backed processing plants have ramped up output of nickel pig iron and mixed hydroxide precipitate. LME inventories have climbed for six straight months. The contango structure in the futures curve suggests no immediate shortage. Against that backdrop, a 12% monthly decline looks like a continuation of the same trend, not a new break.

The better read is more specific. The drop accelerated in the second half of June, after the Federal Reserve's hawkish dot plot pushed the dollar higher. A stronger dollar pressures all dollar-priced commodities. Nickel is especially sensitive because a large share of global supply is priced in dollars while costs are incurred in local currencies. For Australian miners like BHP, the weaker Australian dollar partially offsets the price decline. For Vale, which reports in US dollars but has costs in Brazilian reais, the offset is smaller.

The risk for shareholders is that prices stay below $17,000 for the rest of the year. At that level, high-cost producers in Australia and Canada start to bleed cash. BHP's Nickel West has already been under review; a sustained sub-$17,000 nickel price would make a closure or sale more likely. Vale's nickel division, while more diversified, would see margins compress. AlphaScala's proprietary scoring gives BHP a 66/100 Moderate rating and VALE a 49/100 Mixed, reflecting the divergent risk profiles within the sector.

What would confirm the bearish case? A further drop below $16,000, which would trigger margin calls for leveraged producers and force output cuts. What would weaken it? A surprise drawdown in LME inventories or a supply disruption in Indonesia, where political uncertainty around the new government's mining policies could slow new capacity. Neither catalyst is on the immediate horizon.

The June report also noted that the analyst's long positions include Electra Battery Materials, a smaller player focused on nickel sulfate for the EV battery supply chain. That pick suggests a bet on the downstream processing margin rather than the raw ore price. If nickel sulfate premiums over LME nickel widen, Electra could outperform even if the metal price stays low. For BHP and VALE, the link is more direct: their earnings move almost one-for-one with the nickel price in the short run.

Nickel closed June at $16,733 per metric ton. The next major data point is the July 10 LME stocks report, which will show whether inventories are still climbing or have started to plateau.