Summary of the Core Content
This article reveals a centuries-old “iron law” in the commodities industry that has suddenly been broken: For over a hundred years, the price of the industrial metal nickel has consistently been 2 to 3 times that of copper. However, recently the prices of the two have almost equalized, with copper miners even earning more money than nickel miners. This is not a temporary fluctuation caused by speculation. Behind this change is the significant shift in the production capacity and demand dynamics of these two metals due to the energy transition. In the future, nickel may become cheaper than copper and could even become a core strategic resource that determines the direction of the energy and digital economies.
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Detailed Explanation in Plain Language
1. Understanding the Extent of the Price Inversion
Many people may not be aware that there are many long-established “common senses” in the commodities industry that have been around for thousands of years. For example, for over 2000 years, the price of gold has been approximately 15 times that of silver, and since the 19th century, when large-scale mining began, nickel has always been more expensive than copper. Since the London Metal Exchange (LME), the world’s largest metal trading platform, began trading nickel in 1987, the average price of nickel has been 2.85 times that of copper. This meant that the money you spent on 1 ton of nickel could buy almost 3 tons of copper. However, in recent weeks, this ratio has dropped to 1.17, the lowest level on record. If we consider the actual prices that miners receive for the raw materials, nickel is now cheaper than copper. For instance, an Indonesian nickel miner can earn only $14,500 from selling 1 ton of nickel ore, while a copper miner can earn $15,112 from selling 1 ton of copper ore, a difference of over $600. It’s like going from exchanging 1 gram of gold for 3 grams of silver in the past to now having to give change back after exchanging 1 gram of gold for 1 gram of silver—a stark contrast.
2. Why Has Nickel Suddenly Become Less Valuable?
The fundamental reason for the decline in nickel’s value is a revolution in mining technology that has dramatically increased supply. The same logic that made aluminum go from being more expensive than gold to becoming a material for aluminum cans applies here. In the past, the main source of nickel was sulfide nickel ore, which was very difficult to extract and thus expensive to mine. But in recent decades, new smelting technologies have emerged that allow for the low-cost extraction of “laterite nickel ore” found throughout Indonesia. This ore is located near the surface, and with minimal excavation, it can be processed into nickel products suitable for stainless steel production, significantly reducing the mining costs. Indonesia’s abundant laterite nickel ore has attracted miners from around the world to expand production. As a result, global nickel supply has far exceeded demand in just a few years. This is similar to the situation with iron ore and aluminum prices after technological breakthroughs, where the rapid increase in production overwhelmed the demand.
3. Why Can’t Copper Prices Stop Rising?
Unlike nickel, copper production capacity is severely constrained. Most of the high-quality copper mines on Earth have already been mined, and the yield from mining has decreased significantly over the decades. What used to be 100 pounds of copper per ton of ore now yields less than 10 pounds, with mining costs increasing dramatically. Moreover, copper miners are reluctant to invest in new mines because exploring new deposits takes decades and there is a high likelihood of not finding profitable ones. They prefer to buy existing mines rather than take the risk of exploration. As a result, new copper production capacity is almost stagnant. There is even an absurd phenomenon where copper refineries are willing to pay miners to secure copper ore because the by-products such as gold, silver, and sulfuric acid generated during the mining process are more profitable than refining copper itself. This indicates a severe shortage of copper ore on the market.
4. The Difference in Demand
The difference in demand is the main factor that has reversed the price relationship between the two metals. Nickel’s main uses were in stainless steel and high-nickel batteries. However, with the rapid adoption of lithium-ion batteries in China, the demand for nickel has plummeted by nearly a third. Copper, on the other hand, is in demand across all major sectors of the modern economy. New energy vehicles use four times as much copper as traditional fuel vehicles, and copper is essential for power lines in charging stations and high-voltage grids. Servers, power supply systems, and cooling systems in AI data centers also rely on copper. The global expansion of air conditioning systems also consumes large amounts of copper. In other words, copper is a critical component in the new energy and digital economy, with demand growing exponentially.
5. This Is Not a Temporary Fluctuation; It Represents a Fundamental Shift in the Pricing Logic of Industrial Metals
For over a century, the rule for industrial metals has been that technological breakthroughs would quickly increase production capacity and drive down prices. But copper has broken this pattern. It is no longer just an ordinary commodity used for wires and pipes; it has become a strategic resource that is essential for new energy and digital projects. In the future, building wind farms or AI data centers will require sufficient copper. The premium on copper is no longer just a reflection of its industrial value; it represents an entry barrier for the future era. The current price inversion between nickel and copper is not temporary and may become the new norm. Just as aluminum went from being a precious metal to a cheap material for cans, nickel, with its potential for unlimited production through technological advancements, will become cheaper, while copper, due to its scarcity and limited supply, will become more valuable. The reversal in their relative values reflects who will have the upper hand in the future economy.