Nickel is hotter than gold right now
Indonesia has declared that they will ban nickel ore exports as of January 1st, 2020 (previously scheduled for 2022). On Monday, September 2, 2019, Indonesia’s Energy and Mineral Resources Ministry confirmed plans to move the ban up and place it ahead of schedule. Indonesia currently accounts for about 27-28% of global nickel ore supply. Nickel prices surged higher on the news.
Nickel’s price surge – up over 50% in the past 3 months, up 10% in the last week
Indonesia’s Coal and Minerals Director General Bambang Gatot Ariyono stated: “The government decided, after weighing all the pros and cons, that we want to expedite smelter building. So we took the initiative to stop exports of nickel ores of all quality.”
Indonesia will soon have 36 smelters, and if exports were to continue there would have been only enough reserves for seven to eight years. These smelters can process low-grade nickel ores and they can be used for batteries to help Indonesia meet its electric-vehicle goals. Bambang continued: “We already exported 38 million tons up until July this year. At this rate, we would need to think about our reserves especially if we keep issuing exports permits.”
Put simply, Indonesia has long wanted to encourage investments within Indonesia that can value-add to their nickel ore. The end game would be for Indonesia to be able to produce their own finished nickel, stainless steel, and lithium-ion batteries (NMC batteries require plenty of nickel).
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Nickel supply by country
Other sources of nickel supply
The Philippines has maintained its position as a top nickel ore producer and exporter for approximately a decade. Even though Indonesian ore was generally of a higher grade than ore from the Philippines, nickel miners in the Philippines will try to boost ore production next year when the Indonesia export ban kicks in. The Philippines has 29 nickel mines and two nickel processing plants. However strict environmental law changes in the Philippines in recent years have reduced their nickel supply. Also, it is said that many Chinese buyers prefer higher-grade ores from Indonesia. Current Philippine nickel ore production has dropped to about 340,000 tonnes in 2018, due to the closure of 23 mines as the government seeks to curb environmental damage from mines in the Philippines.
Perhaps the boost will come from New Caledonia, Russia, Australia, Canada, and some contributions from the new Indonesian smelters. But will this be enough?
Nickel demand looks set to increase boosted by electric vehicles
All experts agree that the demand for nickel sulphate is set to go through the roof as electric vehicles (EVs) take off. Demand for nickel in the EV space is expected to reach 350,000-500,000 tonnes by 2025.
No doubt new sources of nickel will start to fill the supply gap that Indonesia will leave, but this takes time. Indonesia will also step up it’s processing of ores, but this will take several years to raise capital and then build out the processing plants. Many companies that halted nickel sales due to the recent bear market years for base metals will start to come back online, as will new nickel projects assuming the nickel price stays strong. Will we see nickel over USD 10/lb in 2020? Yes, I would say this is very possible, as with most severe supply disruptions the industry usually takes a couple of years to catch up.
The top global nickel producers are Vale, Norilsk Nickel, Jinchuan International Group Resources, Glencore, and BHP Group. Some nickel developers to consider include RNC Minerals and Ardea Resources. And some nickel explorers include Canada Cobalt Works Inc. (TSXV: CCW | OTCQB: CCWOF), New Age Metals Inc. (TSXV: NAM | OTCQB: NMTLF), Noble Mineral Exploration Inc. (TSXV: NOB) and Searchlight Resources Inc. (TSXV: SCLT).
For investors, it has been a great past week for the nickel miners, but the best may be yet to come.
Matthew Bohlsen is a Senior Editor for InvestorIntel.com. With a Graduate Diploma in Applied Finance and Investment (similar to CFA), and a Graduate Diploma in ... <Read more about Matthew Bohlsen>