| Katusa's Investment Insights | | Now is the Time to Nickel and Dime By Marin Katusa | | It’s the home of the kagu, a bird that cannot fly.
A strange national symbol and unique to the small country of New Caledonia.
And recently, news about nickel hit front pages around the world due to the brief spurt of political unrest in the French overseas territory.
Now, you might be wondering – why does this picturesque island territory have anything to do with the price of nickel? | | As it turns out, this unassuming patch of Pacific islands... - Produced 6.4% of the world’s Nickel last year – an outsized contribution from a tiny territory just 7,200 square miles in area.
That’s only 12% bigger than the Hawaiian Islands!
While the buzz has settled down, this incident put Nickel into the spotlight.
Now with all of the recent furor over copper, a mineral similarly essential to the net zero transition, you might be wondering…
Why wasn’t Nickel already in the spotlight?
After all, it’s a critical mineral on many countries’ lists, including every member of the G7. It’s a key component in batteries, stainless steel, and several other industrial usages. | | Nickel plays a crucial role in both stainless steel production and electric vehicle (EV) batteries, where it's a key component despite the batteries being named for lithium. - Each EV sold last year contained an average of 25.3 kilograms of nickel, reflecting an 8% increase from the previous year.
The stainless-steel market uses nickel extensively, may not be rapidly expanding.
But it still anticipates steady annual growth of 4-6% across various sectors like appliances, medical equipment, and construction.
Despite its growing usage, nickel hasn't garnered as much spotlight as other base metals.
EV Sales Are Only Part of the Equation
In two words: supply and demand. | | Despite the strong growth in EV sales pushing nickel demand up, this has been offset by two major factors: - A slowdown in stainless steel production, and
- An endless stream of new mines coming online in Indonesia.
| | Stainless steel production turned down in 2022 due to another resurgence of COVID-19 in China. And the global energy crisis that resulted from Russia’s invasion of Ukraine.
Even in 2023, production had only barely recovered to 2021 levels, and so stainless steel production has effectively stayed flat for the past two years.
Since stainless steel accounts for the bulk of global nickel consumption… The slump there has impacted the marketplace far more than the growth in EV sales can make up.
Following this, in the meantime, global nickel production has been steadily on the rise led by low-cost, high-emissions Indonesian mines funded by Chinese capital. - Thanks to this, Indonesia now accounts for over half of total global production, even though 10 years ago it made up less than 10%:
| | | Combined, these two factors have led to nickel inventories staying high, and a supply glut that shows no sign of falling. | | According to consensus estimates from analysts polled by Reuters, nickel supply will continue to outpace demand through 2025 and see a corresponding price slump.
Though if the International Energy Agency’s net zero scenario plays out, demand will turn around and outstrip supply by roughly 25% at the end of the decade.
The Energy Transition is Coming – But Not Fast Enough for Nickel
With how the current supply and demand environment for nickel looks, there’s no sugarcoating it.
Expect prices to go nowhere in the near term as stainless steel production finally gets back to where it should’ve been 2 years ago, and Indonesia moderates their nickel output à la OPEC to ensure they can keep prices at a healthy sustainable level.
Despite its critical role in achieving net zero emissions, nickel lacks the media buzz surrounding copper and lithium.
Hidden beneath the market's radar, nickel presents ripe opportunities for those prepared to dig deeper.
Nickel's Next Big Break?
Decades after a significant nickel deal in a modern African country turned industry heads with a $6.8 billion sale, a similar opportunity looms with a company revitalizing long-dormant mines.
Leveraging historical assets and modern technology…
This firm aims to tap into significant nickel and copper reserves, echoing past lucrative ventures.
With global nickel demand soaring, especially for electric vehicles, this could be an under-the-radar opportunity poised for substantial growth.
Our team is publishing the details on a potential monster nickel project – one that I’ve had my eye on for a long time.
If you want to know the name of this company…
Consider a subscription to my premium newsletter service, Katusa’s Resource Opportunities.
If you want to know exactly how I’m pulling the trigger – click here.
Regards,
Marin Katusa | | | |
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