Nickel is back!

[BREND]

Prices already dropped to about $32,000 per metric ton recently from a peak of around $54,000 per metric ton in May, according to LME data.

Nickel is getting to look like a bargain now. The metal has lost all its gains for 2007 and has retreated to November 2006 levels. Nickel bulls capitulated and the nosedive appears likely to reverse over the next few months.

The Chinese haven't stopped using nickel and the government may soon nullify its export tax rebate on steel products. If this occurs, stainless-steel pricing could firm and then rebound in the fourth quarter and into 2008. This would help nickel rebound.

The LME implemented new rules aimed at preventing collusion between dominant players, and there's a threshold at which long positions are required to lend to the rest of the market, he explained.

But looking further ahead, the world economy's demand for stainless steel will drive nickel demand, he said. And not just in Asia. The hybrid car market is expected to grow significantly.

Also, take a look at how much investment bankers have been wrong in the past few years, he said. They are counting on some very large nickel laterite projects coming on stream over the next few years. Laterite is defined as a red soil produced in rock decay.

Those types of projects are "much more expensive and challenging," Pinkowski said. "This perceived supply may not be as great as people think it will be."

Earlier this week, Rosbaltnord.ru reported that Norilsk Nickel (NILSY) , the world's largest producer of nickel, plans to spend around $1 billion in its facilities in the Kola Peninsula in Russia by the year 2020.

That confirms what Norilsk may portend for the nickel price.

Vested in CVRD and looking to buy Nickel Sept call option

 

[rederob]

It's been a long and winding road but with the metal mix in EV batteries changing to incorporate more nickel, demand estimates may have proven conservative.
Two of the most common rechargeable batteries are Nickel Cobalt Aluminium (NCA) and Nickel Manganese Cobalt (NMC), which previously used 80% and 33% nickel respectively, however newer formulations of NMC are approaching 80% nickel.
The EV market is still minuscule, and it presently accounts for a small fraction of total global nickel consumption. Nevertheless, this component of demand never existed when the previous boom in prices occurred over 10 years ago, so its incremental increase will place a stress on supply in the next few years.
And when I saw this, I wondered:
Are the EV battery gigafactories which are now under construction guaranteeing their supply, thus leading to the large cancellation in warrants in recent weeks?
If you do the maths on the 30 day chart above, then LME warehouses would be empty early next year. I doubt that's likely to occur as metal inventories get volatile when stocks are getting low as more "trading" the market takes places as distinct from physical delivery.
In terms of equities, I haven't followed the ASX producers for a good while, so if any of you are onto something that's looking good, please post.

 

[sptrawler]

Obviously you don't read the stock threads, many threads have been going on about this for the last 12 months, maybe spend some time out of general chat.
Not being funny, but honestly we have been saying nickel is the boom commodity for ages.
Check the nickel threads, MCR, WSA, NIC etc

 

[rederob]

Obviously you don't read the stock threads, many threads have been going on about this for the last 12 months, maybe spend some time out of general chat.
Not being funny, but honestly we have been saying nickel is the boom commodity for ages.
Check the nickel threads, MCR, WSA, NIC etc

I don't read a lot of the threads so thanks for mentioning the nickel equities you are following at ASF.
My post was very specific to a possible reason for this massive decline over an extremely short period'

It's one thing to say something is generally bullish, but it's another again to see something which has not been apparent - ie. different from the relatively "steady" LME inventory drawdowns:
In March this year I posted here at ASF general overview comments on the most traded metals, including nickel, as I watch commodities broadly rather than every metal-specific equity.
Most of the traded metals are near or at 5-year LME inventory lows with little sign of trends in recovery.
Low inventories are no guarantee of metals prices lifting higher, and zinc is an excellent case in point.
And my final point on nickel is that "fundamentals" - using LME inventories as a proxy - were not responsible for the 2 September spike in Oz nickel equities, and have not been reflected by an increase in the spot price:

 

[sptrawler]

There is only about one month's supply on the London metal exchange, most of the other materials required for battery production are in surplus.
The shortfall in nickel is due to mines being closed and Indonesia announcing the closure of its mines early 2020, so the price is rocketing on the expectations of further shortages.
Apologies for short answer, phones have small keys and I have big finger's.

 

[rederob]

Adding to the nickel for EVs theme is this recent graphic:

Presently around 4% of nickel is diverted to the battery sector as a whole, as distinct from solely EVs.
My belief is that the chart above is way too conservative in outyears.
First, the counter intuitive is occurring with luxury vehicles, which have been very quick off the mark to get new models out as EVs. There's a few reasons.
First, many are not just high end, they were also very fast. But Teslas are literally outpacing them, so that's one aspect of appeal that is now lost.
Secondly, as Teslas have proven, EVs can pack a massive amount of technology into a vehicle that gives you the option of almost carefree driving in luxury, or maxing out the responsiveness of the car at "normal" speeds.
Thirdly, and perhaps the biggie, luxury car owners don't like losing a fortune on their new purchase, and the resale vale of ICE luxury vehicles is extremely likely to plummet.
At the "average" buyer level, and perhaps more speculatively, I have a suspicion the "iphone" effect will bite more quickly than most anticipate. That is, EVs are not just a novelty, they are a step change in technology AND safety. Furthermore, while they might be a fair bit more expensive now as an upfront purchase, running costs will compensate if you hold the cars for a longer term than usual. All the more compelling when the car you have today will have a poor resale value in a few years time.
At the bus fleet level, China leads the world in electrification. Given western world concerns about CO2 emissions, it's not too hard for local municipalities and governments to mandate CO2-free public transport.
I'm ambivalent on the heavy vehicle sector as I see hydrogen as the better option down the track; a bit like a re-run of the Beta v's VHS competition which saw VHS win because it ran longer and cost less.

Back onto metal supply, its producers of nickel sulphide concentrate for the EV battery sector which will outperform in coming years, and this is not the type of nickel that has been coming out of Indonesia or the Philippines. I see a reasonable chance that this distinction will see nickel prices divide for stainless steel supply and EV batteries respectively.

 

[Padowan]

Adding to the nickel for EVs theme is this recent graphic:

Presently around 4% of nickel is diverted to the battery sector as a whole, as distinct from solely EVs.
My belief is that the chart above is way too conservative in outyears.
First, the counter intuitive is occurring with luxury vehicles, which have been very quick off the mark to get new models out as EVs. There's a few reasons.
First, many are not just high end, they were also very fast. But Teslas are literally outpacing them, so that's one aspect of appeal that is now lost.
Secondly, as Teslas have proven, EVs can pack a massive amount of technology into a vehicle that gives you the option of almost carefree driving in luxury, or maxing out the responsiveness of the car at "normal" speeds.
Thirdly, and perhaps the biggie, luxury car owners don't like losing a fortune on their new purchase, and the resale vale of ICE luxury vehicles is extremely likely to plummet.
At the "average" buyer level, and perhaps more speculatively, I have a suspicion the "iphone" effect will bite more quickly than most anticipate. That is, EVs are not just a novelty, they are a step change in technology AND safety. Furthermore, while they might be a fair bit more expensive now as an upfront purchase, running costs will compensate if you hold the cars for a longer term than usual. All the more compelling when the car you have today will have a poor resale value in a few years time.
At the bus fleet level, China leads the world in electrification. Given western world concerns about CO2 emissions, it's not too hard for local municipalities and governments to mandate CO2-free public transport.
I'm ambivalent on the heavy vehicle sector as I see hydrogen as the better option down the track; a bit like a re-run of the Beta v's VHS competition which saw VHS win because it ran longer and cost less.

Back onto metal supply, its producers of nickel sulphide concentrate for the EV battery sector which will outperform in coming years, and this is not the type of nickel that has been coming out of Indonesia or the Philippines. I see a reasonable chance that this distinction will see nickel prices divide for stainless steel supply and EV batteries respectively.

Adding to the nickel for EVs theme is this recent graphic:

Presently around 4% of nickel is diverted to the battery sector as a whole, as distinct from solely EVs.
My belief is that the chart above is way too conservative in outyears.
First, the counter intuitive is occurring with luxury vehicles, which have been very quick off the mark to get new models out as EVs. There's a few reasons.
First, many are not just high end, they were also very fast. But Teslas are literally outpacing them, so that's one aspect of appeal that is now lost.
Secondly, as Teslas have proven, EVs can pack a massive amount of technology into a vehicle that gives you the option of almost carefree driving in luxury, or maxing out the responsiveness of the car at "normal" speeds.
Thirdly, and perhaps the biggie, luxury car owners don't like losing a fortune on their new purchase, and the resale vale of ICE luxury vehicles is extremely likely to plummet.
At the "average" buyer level, and perhaps more speculatively, I have a suspicion the "iphone" effect will bite more quickly than most anticipate. That is, EVs are not just a novelty, they are a step change in technology AND safety. Furthermore, while they might be a fair bit more expensive now as an upfront purchase, running costs will compensate if you hold the cars for a longer term than usual. All the more compelling when the car you have today will have a poor resale value in a few years time.
At the bus fleet level, China leads the world in electrification. Given western world concerns about CO2 emissions, it's not too hard for local municipalities and governments to mandate CO2-free public transport.
I'm ambivalent on the heavy vehicle sector as I see hydrogen as the better option down the track; a bit like a re-run of the Beta v's VHS competition which saw VHS win because it ran longer and cost less.

Back onto metal supply, its producers of nickel sulphide concentrate for the EV battery sector which will outperform in coming years, and this is not the type of nickel that has been coming out of Indonesia or the Philippines. I see a reasonable chance that this distinction will see nickel prices divide for stainless steel supply and EV batteries respectively.

Rederob I am also bullish nickel, the recently announced unrefined nickel ore export ban out of Indonesia at 31 Dec caught a lot of producers by surprise, tsingshan the worlds largest stainless steel producer sources a significant proportion of its required nickel from Indonesia, it has major investments in the production of nickel pig iron from laterite deposits in Indonesia
There has been speculation that it has been buying nickel direct from LME over the last month with a targeted volume of between 30 to 80 Kt of nickel.
I’m looking forward to the EV revolution but stainless steel still currently represents about 70% of annual nickel consumption.
Nickel is used in the cathode component of EV batteries in the form of nickel sulphate. Nickel sulphate can be made from a range of nickel products including those sourced from HPAL laterite projects, HPAL laterite projects are more capital intensive and technically challenging to run so generally require a higher incentive price to motivate development over traditional nickel sulphide deposits which produce nickel in a concentrate. There are a lot more known undeveloped nickel laterite projects in the world than sulphide projects.
The batteries in an EV are a significant percentage of cost; current EV uptake is slow due to high sticker price, lack of charging infrastructure and performance. As the production of EV batteries is optimised battery producers will look to control supply chains to manage costs; maybe direct investment or ownership of nickel companies, like happened in lithium. Otherwise if nickel price goes too high it could be substituted in the future for a different battery chemistry
If it wasn’t for the US - China trade war I would think nickel would be in an even stronger position

 

[tinhat]

I went long on nickel miners and prospectors a few months ago. I hold ARL (talk about volatile I was up 80% in 72 hours and am now underwater), CZI (disappointing market sentiment due to delay in PFS), IGO (Gold an nickel producer), MCR (volatile, done OK trading this), SGQ and WSA.

 

[Padowan]

I went long on nickel miners and prospectors a few months ago. I hold ARL (talk about volatile I was up 80% in 72 hours and am now underwater), CZI (disappointing market sentiment due to delay in PFS), IGO (Gold an nickel producer), MCR (volatile, done OK trading this), SGQ and WSA.

Good luck tin hat
I see the LME nickel stockpile closed at 98kt nickel on Friday, the lowest since April 2012.

From 16 September 2019 the LME nickel stockpile has fallen by 68Kt or 41%, that’s got to be good fundamentals or am I missing something?

 

[tinhat]

Good luck tin hat
I see the LME nickel stockpile closed at 98kt nickel on Friday, the lowest since April 2012.

From 16 September 2019 the LME nickel stockpile has fallen by 68Kt or 41%, that’s got to be good fundamentals or am I missing something?

Here is what I have picked up from my reading. E&OE.

- 75% of nickel production is used for stainless steel production. Use of nickel by the stainless steel industry follows a commodity cycle which sees the building up an running down inventories. Nickel bottomed in 2016, and nickel has rallied well this year, but to a large extent this is just reversion to the mean through the cycle.

- Indonesia has decided to bring forward its planned ban on nickel ore exports. Indonesia, through Chinese investment, is developing nickel pig iron smelter production (high pressure acid leaching process used to smelt nickel pig iron from nickel laterite ore). The economics of large scale high pressure acid leaching smelting that can produce nickel sulphate suitable for the EV battery industry is something that is debated amongst analysts. Some say it is too high and nickel sulphate miners will have a cost advantage. Others say that it will be become cost competitive.

- It is said that reserves of nickel laterite ore in the Philippines are running down.

- It's been reported that Tsingshang, the world's largest producer of stainless steel, is behind the recent plummet in LME stocks and that they are actually arranging for physical delivery of the nickel they have purchased from the LME. In practice, the LME stockpile represents a small portion of the amount of nickel held in inventory by industry, but obviously the run down of LME stocks gains the attention of the market.

- The electric vehicle thematic is no doubt exciting the market. Currently the preferred lithium iron battery chemistry being used in EVs uses more nickel than lithium or cobalt. EVs are copper and nickel dense. Nickel increases energy density of Lithium ion batteries which means EVs can store more energy by weight and go further between recharging.

- Bullish estimates predict that within a decade EV sales will reach parity with internal combustion engine vehicle sales and by 2050 half of the world's road transport fleet (car, bike, bus, haulage) will be EV. Nickel bulls see this as a seismic shift in the market for nickel.

- Of all the metals needed by the EV revolution, Nickel is the one forecast to be in deficit in the next couple of years.

- Despite the above, there are many options for EV battery chemistry. If nickel becomes too expensive, EV manufacturers may adopt less nickel intensive chemistry. Currently there is a huge investment going into Lithium iron battery mega factories globally that are gearing up around high Nickel density batteries but that could change.

- Liquid hydrogen may develop into a potential competitor to Lithium iron batteries for EVs in time.

- The recent run up in nickel prices is likely to see an increase in recycling and recovery of nickel in the short term. In the medium to long run recovery and reuse of nickel and other metals from Lithium iron batteries will form a significant supply into the manufacturing of new batteries.

- IMHO, the outlook, from what I have read, in the next couple of years looks bright, but markets never move in a straight line. Some of the nickel stock have run hard recently and are displaying some volatility.

- There is a lot of nickel in the earth's crust and a lot of nickel sulphide sitting close to surface in WA. Like all commodities its just a question of what market price is needed to bring new production on-stream and what price prospective miners should use to determine the economics of their prospective production. Right now a lot of Australian producers are bringing their mines out of care and maintenance and ramping up production again.

- In summary in the short term demand exceeds supply. It is predicted that this will persist into the medium to long term on the assumption that EV battery chemistry will remain nickel intensive as per the current global wave of battery mega factory ramp up.

 

[sptrawler]

Great summation Tinhat, you were very perceptive to mention the possibility of other options for E.V's and batteries in general, there is mega bucks being poured into battery design and development.
So as you mention it is a good bet at present, but what the future holds who knows, I have seen nickel boom and bust several times over my lifetime so IMO it is always one to keep a close eye on when buying but especially when holding.

 

[rederob]

Metal News - Published on Wed, 16 Oct 2019
Indonesian Government aims to build 31 nickel smelters by 2022, with 20 projected to open next year to help the production of electric car components. Head of the mineral exploration business at the Indonesian Ministry of Energy and Mineral Resources Mr Andri Budhiman said at a recent seminar that with many smelters going into operation, there was no concern about the supply of electric car components. Mr Budhiman explained that Indonesia’s proven nickel reserves of 698 million tonnes could only guarantee the supply for refining facilities for 7.3 years. Meanwhile, the country’s estimated nickel reserves stand at 2.8 billion tonnes.

MEMR Regulation No. 4/2009 prescribes that mining companies are required to process and refine raw materials to raise added values. Then, the minimum processing and refining limits for metal minerals, non-metals and rocks have been regulated by the MEMR Regulations No. 5/2017 and No.25/2018.

 

[rederob]

LME warehouse data is always a few days old in real terms as they do not have live inventories. So the most recent data is a few days out,
More importantly, it shows "closing" inventory, or total metal held. This number excludes
Cancelled Tonnage.
Typically cancelled tonnage is a small fraction of what's still in the warehouse. However, in the case of nickel at the moment, it is not.
Nickel warehouse have 42,594 tonnes sitting as "cancelled" with only 52,068 available for future purchase.
So in the near term nickel's fundamentals could see a lot more upside.
The demand response is in the wind as more mines are coming out of mothballs... but we ain't there yet.

 

[rederob]

COVID-19 might give unaffected Australian producers a lift as the Philippines suspends half its output.
Separately, Indonesia might have difficulty in funding their longer term plans to ramp up output if their mining sector is decimated as a result the economic impacts on local companies.
COVID-19 could be that cloud which has a silver lining for many Australian base metal producers, and with the top 2 nickel producing nations likely to be heavily affected (and them being at China's doorstep), nickel price increases could be disproportionately affected.
A good space to watch.

 

[qldfrog]

Nickel is known as the mineral of choice for war...

 

[The Triangle]

I still think the Aussie nickel plays are one of the big risks. The overwhelming majority of nickel is used in stainless and that's not exactly a high performer in bad economic times. (You would think 99% goes to Tesla batteries reading what others say). Lots of SS used in cars - but not going to be seeing people buy new cars - especially electric ones when oil is this low. I think the A$ with strengthen vs USD as well to offset any nickel gains which could occur once the world sees Australia is far better shape than everyone else. People have been waiting a decade plus for nickel to rocket up. It wont. Indo nickel ban and electric cars are irrelevant.

 

[sptrawler]

I still think the Aussie nickel plays are one of the big risks. The overwhelming majority of nickel is used in stainless and that's not exactly a high performer in bad economic times. (You would think 99% goes to Tesla batteries reading what others say). Lots of SS used in cars - but not going to be seeing people buy new cars - especially electric ones when oil is this low. I think the A$ with strengthen vs USD as well to offset any nickel gains which could occur once the world sees Australia is far better shape than everyone else. People have been waiting a decade plus for nickel to rocket up. It wont. Indo nickel ban and electric cars are irrelevant.

The price of nickel has taken a real hammering, since the outbreak, as you say demand for stainless and vehicles has taken a real hit.
The high cost producers will be finding it difficult to make money at $5USD/lb, hopefully it rebounds when the World economy kicks off, but when that will be who knows?

 

[The Triangle]

Nickel never really came back after the gfc like a lot of people expected. I think $5 -$6 is the new standard. Low grade low tonne mines wont cut it as investment grade.

We now see Panoramic shelving things - which was entirely predictable before corona. Will mincore and wsa be next to can their projects? Or will their mines hit production for a recovery? I still believe that there is no long-term investment money to be made in WA nickel until there is massive consolidation. If they could merge 3 of these players in to one - 5 to 10 m saved in exec and board fees. All the support services would be combined for a few million in savings. Capex and production profiles could be staged and optimized.

Interesting to know if PAN will be in the legal hot seat for rejecting the igo offer.

 

[sptrawler]

Nickel never really came back after the gfc like a lot of people expected. I think $5 -$6 is the new standard. Low grade low tonne mines wont cut it as investment grade.

We now see Panoramic shelving things - which was entirely predictable before corona. Will mincore and wsa be next to can their projects? Or will their mines hit production for a recovery? I still believe that there is no long-term investment money to be made in WA nickel until there is massive consolidation. If they could merge 3 of these players in to one - 5 to 10 m saved in exec and board fees. All the support services would be combined for a few million in savings. Capex and production profiles could be staged and optimized.

Interesting to know if PAN will be in the legal hot seat for rejecting the igo offer.

PAN didnt reject the offer, IGO withdrew it after due dilligence, obviously a good move.
The producers around the goldfields IGO, WSA, MCR and BHP should be fine, established processing trains just requiring demand to increase.
Which one would expect to happen, this speed hump has really put a damper on the short term outlook, but Im expecting demand to rise sharply in the next 12 to 18 months.
China has stated they are going to urbanise 100 million people in the next two years, BEVs will be pushed, to stimulate the car market IMO.
PAN really were between a rock and a hard place, in the Kimberlies, long haul to Wyndham port and a long drive to the new ore body. It was always going to be hard, but at $8/lb ok at $5 it is goodnight Irene.
Anyway just my thoughts.

 

[peter2]

Interesting price spikes in some nickel stocks last week. MCR, NIC, SGQ, BSX.
Not supported by the major nickel producers, WSA, IGO.

Kitco price charts for nickel show a recent rally off yearly low.



Edit: Almost forgot to mention that Sth American production of nickel and other base metals have been significantly cut by corona virus outbreaks and subsequent lock downs of mining sites. (ie production cuts not just happening to iron ore producers)