History points to nickel leading rebound in base metal prices

The past 35 years of price data suggests nickel prices are the closest of all base metals to bottoming out while nickel sees the greatest risk of prices rebound sharply from current levels.

Looking across the main base metal prices the extent of the current down-cycle, only copper and nickel match or exceed previous down-cycles in prices. Both metals, but nickel in particular also have the greatest risk of a significant imminent move up in prices from current depressed levels. In contrast aluminium, tin and zinc have tended to need to fall much further and remain much longer trading at depressed levels than they have so far this time around.

Monthly average prices versus rolling 5-year average

A cursory look at the chart above shows that while nickel price are prone to falling very far below its rolling 5-year average (often to around 50% below) it also sees sharp and more frequent bull markets than other base metals too. Twice in the past 35 years nickel prices have reached 250% above their rolling 5-year average and typically seeing more pronounced price spikes.

Relative to their rolling five-year averages, monthly prices in December were down by 39% and 51% respectively for copper and nickel. That compares with an average maximum decline of 33% for copper and 39% for nickel relative to five-year averages since 1980. This period covers each of the last three major economic downturns of the past 35 years (the 1980s global economic slump, the late 1990s Asian economic crisis and the 2008 financial crisis).


However, higher for longer implies lower for longer too. Defining “bumping along the bottom” as a period of six months or more where prices trade at 20% or more below their prevailing five-year average, then copper at seven months so far compared to an average of 14 months in previous cycles, and nickel at 11 months compared to its historical average of 15, are far closer than other base metals to seeing prices rebound.

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