Investing in Nickel via Futures Contracts
Nickel is a ferrous metal, which means it belongs to the iron group of metals. Nickel, which is traded on futures markets, is an important industrial metal that is used as an alloy with metals such as iron and copper. The commodity is sought after because of its ductility, malleability, and resistance to corrosion.
One of nickel’s primary applications is in the creation of stainless steel. When steel is alloyed with nickel, its resistance to corrosion increases dramatically. Because stainless steel is a necessity of modern life, and a large portion of nickel goes toward the creation of this important metal alloy, you can rest assured that demand for nickel will remain strong.
As you can see from the following table, although there are a number of important uses for nickel, the creation of stainless steel remains its primary application.
|Sector||Percentage of market consumption|
Source: London Metal Exchange
Australia has the largest reserves of nickel, and its proximity to the rapidly industrializing Asian center — China and India — is a strategic advantage. Another major player in the nickel markets is Russia; the Russian company Norilsk Nickel is the largest producer of nickel in the world.
Nickel mining is a labor-intensive industry, but those countries that have large reserves of this special metal are poised to do very well. Check out the countries with the largest reserves of nickel in the following table.
|Country||Reserves (Thousand Tons)||Percentage of Total|
|Papua New Guinea||8903||4.6%|
Source: U.S. Geological Survey
The London Metal Exchange (LME) offers a futures contract for nickel. The nickel futures contract on the LME provides you with the most direct access to the nickel market. It trades in lots of 6 Tons, and its tick size is $5.00 per ton. As with zinc, it trades during the first month, in addition to 27 subsequent months.