Vale takes hit from nickel hedging amid record price spike

The nickel market was roiled in the first quarter by a massive short squeeze on the London Metal Exchange that culminated in a price spike to above $100,000 a ton on March 8. The frenzy led to the suspension of trading for six days in the world’s main metals market.

Vale had 41,500 tons hedged as of March 31, up from 39,600 tons at the end of December, at an average strike price of $21,436 per ton. The option position, which Vale said wasn’t subject to margin calls, had the effect of lowering Vale’s realized price by $1,899 per ton.

“We typically hedge a smaller portion of our sales. Given the soaring prices in the quarter we had a negative impact on our hedge results,” Vale’s Base Metals Vice President Deshnee Naidoo said Thursday on a call with investors.