Nickel Price $20,000/ton Rebound: Indonesia Exerts Control and EV Revolution Accelerates

Recording date: 4th November 2024
The nickel market is on the cusp of a major inflection point. Prices look poised to surge back towards $20,000 per ton by year-end and could have much further to run as a structural supply deficit emerges.
The key driver is the rapid electrification of the global auto fleet. Electric vehicle sales are defying skeptics, soaring 22% through September to hit a record monthly high. Demand for nickel-bearing batteries is getting a further boost as hybrid vehicle sales take off, jumping 45% this year. With auto giants rapidly shifting production to EVs, securing adequate battery metal supplies is becoming a strategic imperative.
On the supply side, Indonesia, which now controls nearly two-thirds of global nickel output, is weaponizing its position, restricting ore exports to China in a bid to maximize prices and margins. The impact is already showing up in the data, with Chinese nickel pig iron production declining and ore imports from the alternative supplier, the Philippines, surging. But with the Philippines heading into the rainy season, ore supplies look set to tighten meaningfully.
The current low inventories on the London Metal Exchange, equivalent to less than two weeks of consumption, suggest the market is much tighter than the analyst consensus, which is still calling for surpluses. The potential for Indonesia to take a page out of OPEC's playbook and exert more control over nickel supply is a major wildcard that is underappreciated by many market participants. For investors, this backdrop creates opportunities in nickel explorers and developers. Projects that can deliver scalable, battery-grade supply from stable jurisdictions look particularly well positioned to fill the looming supply gap and benefit from government efforts to build homegrown supply chains. The US is kickstarting this trend, allocating $4 million for engineering studies at Canada Nickel's Crawford project in Ontario, with billions more earmarked to build out domestic critical mineral capacity.
Other junior miners are also making promising discoveries. Power Nickel hit 40 meters of high-grade mineralization in Quebec. Talon Metals intersected nearly 100 meters of nickel in Michigan. FPX Nickel is advancing a major new nickel deposit in British Columbia. Each success increases the odds that the battery industry can diversify supplies beyond Indonesia.
The next few months could provide a lower-risk window to build positions ahead of the expected upturn in nickel prices. Selby points to the 1970s, when investing in oil projects outside of OPEC after the embargo proved to be a winning strategy for the next two decades. While near-term volatility is likely, the long-term supply-demand fundamentals for nickel look highly compelling. As Selby sums it up: "Being investing in a commodity that's being managed effectively by a group is a generational opportunity to make a lot of money."
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