Investors bet on nickel prices and nickel stocks to rally in 2019
Use of nickel has been traced as far back as 3,500 BC. In more recent times nickel has been used in coins (a nickel), but is best known for its use in stainless steel driven mostly by Chinese construction. With the current negative sentiment due to the US-China trade war and some mild slowdown in China, nickel prices have fallen to a low level, as have the nickel miners. Provided we don’t head into a significant China or global slowdown, any resolution in the trade war with China should lead to some recovery in nickel prices and the nickel miner’s stock prices.
Class 1 nickel demand forecast to increase 17 fold from 2017 to 2025 due to the EV boom
According to McKinsey research if annual electric vehicle (EV) production reaches 31 million vehicles by 2025 as expected then demand for high-purity class 1 nickel is likely to increase significantly from 33 Kt in 2017 to 570 Kt in 2025. Class 1 nickel is the “high purity” nickel that is used in electric vehicle lithium ion batteries. The stainless steel industry uses both class 1 and class 2 nickel (lower purity) and is the main driver of overall nickel demand.
McKinsey also states that “a shortfall in class 1 nickel production seems increasingly likely as current low nickel prices do not support class 1 nickel capacity expansions and alternative strategies, as a result, not only will nickel prices likely need to move towards incentive pricing but the future pricing mechanism is likely to reflect two distinct nickel products: class 1 and class 2. At the same time we expect to see two distinct nickel price mechanisms emerge reflecting two distinct commodities: class 2 nickel, primarily for use in stainless steel production, trading at a lower price that reflects its abundant supply; and class 1 nickel trading at LME prices – or above for high-end nickel powders and pellets used to make nickel sulfates – reflecting required incentive prices.”
The key to understand here is that the nickel sulfide ore miners have a distinct cost advantage when producing the nickel sulfate required for EV batteries, and demand for class 1 (high purity) nickel is set to skyrocket.
Some companies to consider with nickel and nickel by-product projects
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Canada Cobalt Works Inc. (TSXV: CCW | OTCQB: CCWOF) is primarily a cobalt company focused on their past producing Castle Mine. Last November they announced drilling on the first level of the Castle Mine had returned high-grade cobalt, nickel, and silver grades. The nickel highlights from the first two of three drill holes included 1.65% nickel over 7.00 meters, and 1.29% nickel over 2.54 m.
Critical Elements Corp. (TSXV: CRE | OTCQX: CRECF) is primarily a lithium company that has 5 projects containing nickel. They are Nisk, Caumont, Duval, Lemare, and Valiquette.
New Age Metals Inc. (TSXV: NAM | OTCQB: NMTLF) is a mineral exploration company focused on the exploration and development of platinum group metals. Their Genesis PGM/ Polymetallic Project is a road accessible, under explored, highly prospective, multi-prospect drill ready palladium (Pd) -platinum (Pt) -nickel (Ni) -copper (Cu) property.
Noble Mineral Exploration Inc. (TSXV: NOB) is a Canadian based mineral exploration company and project generator. The Company holds over 70,000 hectares of mineral rights in their flagship Project 81 in Canada. Project 81 hosts a number of zones that have had historical exploration, identifying nickel and gold mineralization from work carried out in the 1960’s and 1970’s.
Pancontinental Resources Corporation (TSXV: PUC) is focused on strategic battery metals projects, with a particular focus on prospective nickel-cobalt-copper properties in proven mining districts with excellent infrastructure. On January 7, 2019 Pancon commenced its maiden diamond drill program on its nickel-cobalt-copper Montcalm Project. They also have the McBride nickel-cobalt-copper project, an advanced exploration and development property with historical resources of 5.1 million tons of nickel-cobalt-copper mineralization.
Due to 2018 being such a bad year for EV metal miners investors are hoping China doesn’t have a slow down and the current trade war comes to an end. If this is the case then 2019 should be a good recovery year for nickel and 2020 could be even better as the EV boom kicks in with much larger EV sales numbers.
Matthew Bohlsen holds a Graduate Diploma in Applied Finance and Investment (similar to CFA), and a Graduate Diploma in Financial Planning. He has 30 years ... <Read more about Matthew Bohlsen>