The 2022 Nickel Crisis and Why It Actually Happened

Nickel produced one of the most extraordinary events in modern commodity market history in March 2022, and it is worth explaining accurately rather than treating as a footnote, because it revealed something real about how thin and fragile even a major metal exchange’s price discovery can be.

What actually happened

A major Chinese nickel and stainless steel producer, Tsingshan, held a very large short position in nickel futures, effectively a bet that prices would fall, sized against its own substantial physical nickel production capacity as a hedge. When nickel prices instead began rising sharply amid supply concerns tied to Russia’s invasion of Ukraine (Russia being a significant nickel producer), the short position came under severe pressure, and other traders’ attempts to close out related positions accelerated the price spike further into a short squeeze, prices rising dramatically within hours, in a way that bore little relationship to any real, physical change in nickel supply or demand that day. The London Metal Exchange took the unprecedented step of suspending nickel trading entirely and cancelling trades that had already executed, a decision that remains genuinely controversial and drew criticism from market participants on multiple sides.

Putting a number on why one actor mattered so much

The same Herfindahl-Hirschman Index introduced on cobalt’s economics page helps explain why a single major Chinese producer’s hedge could move the entire market:

Nickel’s mine-supply HHI, computed from Indonesia’s 61.1 percent share alone plus the single-digit shares of Philippines, Russia, New Caledonia, Canada, Australia, China, and Brazil, comes out to roughly 3,953, comfortably above the 2,500 “highly concentrated” threshold. A market that concentrated, where one country and, within it, a small number of large producers account for most physical supply, is structurally more exposed to exactly the kind of single-actor dislocation that happened in 2022 than a genuinely diversified market like copper’s mining stage would be.

Why this is a real structural lesson, not just a one-off event

The episode exposed that nickel’s exchange-traded market, though used globally as the reference price for physical contracts, can be thinner and more exposed to a single large position than its role as a benchmark price would suggest. It also highlighted the real entanglement between nickel’s physical supply chain (a major Chinese producer’s hedging behaviour) and its financial market, a connection that does not show up in simple supply-and-demand price models.

A slower-moving risk to the same demand base: the LFP substitution

The 2022 crisis was a sudden shock to nickel’s financial market. A separate, slower-moving shift is reshaping nickel’s real, physical demand: LFP (lithium iron phosphate) EV cathodes use no nickel and no cobalt at all, and by 2025 LFP had overtaken nickel-based chemistries (NMC and NCA) to account for roughly half of global EV battery deployment, up from a small fraction a few years earlier.

That regional split matters more than the global average suggests. A battery market moving toward LFP is a market whose nickel demand is quietly shrinking relative to what a pure EV-growth forecast would predict, while a market still overwhelmingly on NMC/NCA keeps its full nickel exposure, including to the concentration and financial-market fragility this page documents above. Two regions can have identical EV sales growth and completely different nickel demand trajectories, purely as a function of which cathode chemistry their manufacturers picked.

Sources: this section reflects extensive, widely corroborated reporting on the March 2022 nickel crisis (Reuters, Financial Times, Bloomberg); HHI is computed directly from this project’s own published production data; the 2,500 HHI threshold is the US Department of Justice/FTC Horizontal Merger Guidelines convention; LFP adoption shares are widely reported in battery chemistry market tracking (SNE Research, Benchmark Mineral Intelligence, IEA Global EV Outlook).