For investors, an opportunity may be emerging as several nickel producers and explorers are trading at multi-year lows. The rise of the electric v
For investors, an opportunity may be emerging as several nickel producers and explorers are trading at multi-year lows.
The rise of the electric vehicle (EV) sector has resulted in an immense need for industrial metals. One of them is nickel. Yet, the ensuing overflow of cheap nickel from Indonesia resulted in the price of the metal dropping precipitously. Now, there are signs of a gradual recovery.
For investors, an opportunity may be emerging as several nickel producers and explorers are trading at multi-year lows.
The price of nickel rebounded to above US$19,000 a ton in April from a low of US$15,700 earlier in the year. While that’s well below the recent high of more than US$48,200 a ton in April 2022, the move indicates the formation of a floor and signals the early makings of an upside formation.
This rebound is happening for two reasons: sustainability and overblown supply claims.
Nickel market activity is being driven by the emergence of sectors such as EVs and long-term energy storage solutions. But more importantly, it’s being driven by the reason these sectors exist in the first place: global sustainability.
Despite the excess nickel available, the market is not fully satisfied. That’s because nickel from Indonesia, while cheap, is also dirty and therefore won’t support climate and net-zero goals. In fact, it’s doing the opposite – and that’s affecting investors’ decision-making.
For corporations to be profitable over the long term, traceability needs to become a key component of nickel mining. The same scenario played out with cobalt. Investors, customers and governments will want and need to be able to trace raw battery materials such as nickel back to their origins, and those producers that can deliver that information quickly will come out on top.
As for supply, Indonesian nickel output pillaged global mining producers last year. Canada’s Deputy Prime Minister Chrystia Freeland and Natural Resources Minister Jonathan Wilkinson have spoken out about the glut of supply from Indonesia – with production mainly from China-based mining companies – and warned of market manipulation making Western mining companies’ operations uneconomical.
But Jim Lennon, a 44-year veteran nickel watcher with Macquarie Bank Ltd., has reported that nickel inventory is far lower than the reported figures, meaning the market could correct faster than many expect.
The International Energy Agency has forecast supply shortages later this decade as demand for green technologies rises, marking the importance of continued mining expansion in the West.
Greg Beischer is chief executive officer, president and director of Anchorage-based Alaska Energy Metals, which mines various metals, including nickel.
Source: The Globe And Mail
COMMENTS