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9 Best Nickel Stocks: How to Trade The Surge in Nickel Prices

Haiden Holmes

Apr 25, 2022 16:57

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Nickel was typically employed in stainless steel production prior to the electric vehicle revolution. 


The emergence of what BHP refers to as 'Electrification Mega Trends' has fundamentally altered the outlook for the metal. 


Nickel will be required for a variety of applications, including wind turbines, electric vehicles, solar panels, battery charging, electric vehicle batteries, and grid storage solutions.

Why are nickel stocks up?

Last week, the Philippine Stock Exchange saw a big share in the price of nickel mining stocks. This was prompted by a precipitous rise in the price of nickel traded on the London Metal Exchange (LME).


Nickel's increased price on the LME is mostly attributable to a sharp decline in inventory levels.


The reduction in nickel inventories is being attributed to the increased demand for lithium-ion batteries used in electric vehicles. Notably, numerous organizations forecast that demand for electric vehicles will grow at a compounded annual growth rate of more than 20% over the next five to ten years as governments worldwide encourage the adoption of electric vehicles for environmental reasons. As a result, demand for nickel for electric car batteries is increasing and is predicted to exceed 50% of total nickel demand by 2030.


Increased demand from China is also contributing to the decline in LME inventories. Stainless steel production, which incorporates nickel, increased to a new high this year despite decreasing economic growth.


While demand for nickel is increasing, supply is decreasing. Access to Indonesia's Morowali Industrial Park, one of the country's main nickel mining locations, was recently sealed off due to persistent rainfall and significant landslides.


In June, Vale, the world's largest nickel mining firm, also suspended nickel processing activities at its Once Puma plant in Brazil, following a court ruling ordering the site's complete shutdown for environmental grounds. This factory produces around 11% of Vale's output.


Exacerbating supply fears was a report last week that Indonesia is committed to implementing plans to permanently ban the export of raw nickel ore in 2022, following a five-year window beginning in 2017 for miners to build smelters onshore.


Although nickel prices may correct in the near term as Indonesian supply normalizes and as higher LME nickel prices draw down China's inventories (which are currently at a 17-month high of 25,800 MT), any correction may be temporary as demand continues to rise due to the growing demand for electric vehicles.


Meanwhile, supply may decline once Indonesia bans raw nickel ore exports in 2022. The upward trend in nickel prices should benefit the earnings prospects of nickel mining companies listed on the Philippine Stock Exchange, resulting in long-term increases in share prices.

Is it a good idea to invest in nickel?

Nickel is a silvery-white, extremely hard yet flexible metal that retains its characteristics even at extremely high temperatures. Nickel has been utilized in everything from coins and showerheads to electric car batteries since 3,500 BC.


Today, nickel is a critical component of lithium-ion batteries used in electric vehicles. According to mining giant BHP, an electric car's lithium-ion battery includes 40 kg (88 lbs) of nickel. Lithium-ion batteries can also be used to store energy generated by renewable sources. Battery storage is becoming increasingly important as we increase our reliance on weather-dependent renewables such as wind and solar.


Why is nickel so valuable? When batteries include more nickel, the car may operate for extended periods of time without needing to be recharged. Nickel enhances the performance of batteries, which is crucial for larger EVs such as electric vehicles. Currently, only approximately 7% of nickel is used in batteries; the majority is used to manufacture stainless steel. However, the share of EV batteries in nickel usage is anticipated to increase in the future.


The International Energy Agency estimates that demand for nickel from EVs and storage must increase from 81 tons in 2020 to 3,352 tons in 2040 under a sustainable development scenario.

What effect would nickel price volatility have on stocks of electric vehicle manufacturers?

Nickel is primarily utilized in the steelmaking process, but it is becoming more well-known for its expanding importance in the construction of batteries for electric vehicles, with Russia being the world's largest producer of battery-grade nickel.


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Prior to the outbreak of the Ukraine conflict, forecasts indicated that nickel supply would fall behind growing demand this year, raising grave concerns that the imbalance would only worsen.


Electric car manufacturers are already facing shortages of other critical components, including microprocessor chips, and some have begun raising vehicle prices to offset rising expenses. Increased prices will dissuade people from switching to electric vehicles, as the majority of manufacturers admit they need to lower prices to hasten the shift to greener modes of transport.


Additionally, the timing is noteworthy. While the market is not devoid of players, a number of new companies are expected to enter by 2022, and hundreds of new models are expected to be launched this year alone. Rivian and Lucid have only recently begun rolling cars off their production lines, and companies ranging from start-up Fisker to established manufacturers such as Ford are slated to unveil new electric companies this year. This will exacerbate competition for scarce resources within the industry and drive up demand at a time when supply is expected to tighten.


Traditional automobile manufacturers are also at risk, as palladium and other metals are required to manufacture catalytic converters. Volkswagen has previously declared that it has ceased taking orders for certain hybrids as it confronts a slew of market headwinds.

What are the largest nickel producers?

According to Mining.com, Vale, a Brazilian mining behemoth, is the world's second-largest nickel producer. Glencore, a global mining and trading conglomerate listed on the London Stock Exchange, is the third-largest producer, while BHP Billiton and Anglo American are the fourth and fifth largest producers, respectively.


While these companies are the world's largest nickel producers, they are not true nickel plays. BHP Billiton and Vale, for example, derive the majority of their earnings from iron ore. Copper is the primary source of revenue for Anglo Americans, while copper and zinc make for the majority of Glencore's revenue.


If you're seeking nickel stocks, these may not be the best candidates. While they produce a lot of nickel, the metal contributes very little to their revenues, and their sensitivity to nickel prices is extremely low.

Best Nickel Stocks to Watch

1. Norilsk Nickel

Norilsk Nickel is Russia's largest mining corporation and one of the world's leading nickel producers. It extracted 200,000 tonnes of the metal in 2021. Still, it only accounted for approximately one-fifth of its earnings due to the company's considerable production of other minerals such as palladium, platinum, copper, cobalt, and gold.


Nonetheless, the prospect of the Russian supply of critical commodities being cut off by sanctions implies that world supplies might take big damage. Norilsk Nickel alone accounts for nearly 8% of global nickel supplies, according to Statista, which helps to explain why the metal's price has risen so dramatically in recent weeks.


Meanwhile, Norilsk Nickel's shares have dropped as investors flee Russian stocks, fearful that the company will be cut off from foreign markets and unable to sell its products outside of Russia's sphere of influence.


Norilsk Nickel shares have fallen more than 80% since the Ukraine war began and are now at all-time lows. While the stock will stay unpopular as long as the current geopolitical crisis persists, it might become an attractive recovery bet if tensions ease.

2. Canada Nickel Company Inc. (OTC:CNIKF)

Canada Nickel Company Inc. (OTC:CNIKF) is a nickel sulfide exploration firm based in Northern Ontario, Canada. The company owns the Crawford Nickel-Cobalt Sulphide Project. Canada Nickel Company Inc. (OTC:CNIKF) was established in 2019 and is based in Toronto, Canada.


The Crawford Project, the company's flagship property, contains one of the world's greatest nickel reserves. It is a precious resource that stands to benefit significantly from the continuous rollout of electric vehicles for many years to come, as nickel is a critical component of EV batteries. The shares of Canada Nickel Company Inc. (OTC:CNIKF) have increased by 15.64 percent in the last six months.


Canada Nickel Company Inc. (OTC:CNIKF) increased its initial public offering from C$25 million ($19.66 million) to C$45 million ($35.39 million) on March 9, 2022. The business intends to issue 8.3 million shares at a price of C$3.10 ($2.44) per share, 3.4 million flow-through shares at a price of C$3.65 ($2.87) per share, and 1.5 million charity flow-through shares at a price of C$4.46 ($3.51) per share.

3. Vale S.A. (VALE)

Vale S.A., the world's second-largest nickel producer, mines nickel in Brazil, Canada, Indonesia, and New Caledonia. Vale produced 182,000 metric tons of nickel in 2021 alone. Beyond nickel, nickel mines contain minerals such as cobalt and copper, which are also crucial to the electric vehicle sector.


Vale is not, however, a nickel-only stock. Additionally, the mining behemoth is the world's greatest producer of iron ore; it also produces manganese and copper. Nickel accounted for almost 10% of net revenues in 2021. We observe that Vale is divesting its coal business, which makes this stock less appealing to environmental, social, and governance (ESG) investors, many of whom aim to avoid fossil fuels.

4. PolyMet Mining Corp. (NYSE: PLM)

PolyMet Mining Corp. (NYSE: PLM) is a mining corporation having interests in a variety of metals, including copper, nickel, cobalt, gold, silver, and platinum. It ranks tenth on our list of the top ten nickel stocks to purchase right now. The stock has provided investors with more than 29% returns during the last four weeks. NorthMet, a polymetallic project in Minnesota covering an area of more than 4,000 hectares, is one of the firm's flagship projects. Copper and nickel mines are included in the natural resource development project.


PolyMet Mining Corp.'s (NYSE: PLM) stock soared to a six-month high in February, rising 16 percent in a single day after the state's highest court decided in favor of the company in a lawsuit regarding a clean air permit issued by the state's environmental agency.


Among the hedge funds tracked by Insider Monkey, Renaissance Technologies of New York is a significant shareholder in PolyMet Mining Corp. (NYSE: PLM), owning 304,746 shares worth more than $963,000.


PolyMet Mining Corp. (NYSE: PLM), like Vale S.A. (NYSE: VALE), BHP Group (NYSE: BHP), and Rio Tinto Group (NYSE: RIO), is one of the top nickel stocks to purchase right now.

5. Poseidon Nickel (POS)

Poseidon Nickel Limited is nickel and other mineral exploration, development, mining, and production company in Australia. It has interests in Western Australia's Mt Windarra, Black Swan, and Lake Johnston nickel projects. Previously called Niagara Mining Limited, the firm changed its name to Poseidon Nickel Limited in 2007.


Poseidon Nickel's stock opened the day at A$0.11 after closing at A$0.11 the previous day. The most recent price was $0.11 Australian (25-minute delay). Poseidon Nickel is an ASX-listed company with a trailing 12-month revenue of approximately AUDC$256,000. All prices are in AUD.

6. Glencore (GLNCY)

Glencore is another enormous, diversified corporation that produces nickel as well. Indeed, it was the world's third-largest nickel producer in 2020, producing 101,600 tons of nickel. Metals and minerals, energy, marketing, and recycling are all areas of operation for the company.


The company's metals and minerals segment is focused on approximately a half-dozen metals. In a nutshell, it is a highly diversified organization, and it is not a nickel-only corporation. Nickel assets are located in Asia, Australia, Canada, and Europe, and the company expects to generate $591 million in EBITDA from those operations in 2020.


I previously stated that the company would generate 101,600 tons of nickel in 2020. Simultaneously, it sold 149,000 tons of nickel within the same time period. As a result, the corporation is anticipated to increase its reserves and production.


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Glencore should also be attractive to investors focused on environmental, social, and governance (ESG) issues. The company has expressed its intention to achieve net-zero emissions by 2050.

7. Rio Tinto (RIO)

Rio Tinto is another significant Australian mining firm that is the world's second-largest miner, behind BHP Group. The company is a multi-miner with a concentration of gold, copper, and iron ore, and it is, nonetheless, actively invested in nickel prospecting and mining.


The corporation owns a 75% share in Finland's Enonkoski nickel project. Rio Tinto is investing more than $20 million in the Finnish nickel project's commercialization. The Enonkoski mine produced an average of 6.7 million tonnes of nickel per year between 1984 and 1994, and Rio Tinto hopes to restart production at the site.


Additionally, Rio Tinto is assisting in the restart of the Tamarack Nickel Project in Minnesota. Tamarack is planned to be a significant supplier of nickel to the domestic electric vehicle sector in the United States and a crucial component of the country's nickel supply chain. The Australian mining behemoth is refocusing its future efforts on nickel as demand and prices for the metal climb.


RIO stock has gained 10% so far in 2022, rising to $73.61 a share. The stock has been gaining pace as nickel, and other commodities prices have risen in recent weeks as the war in Ukraine has deteriorated.

8. Legend Mining Limited (ASX: LEG)

Legend Mining has entered the fray with the Rockford project in Western Australia's Fraser Range province. The project is a 70/30 joint venture between Legend and Creasy Group, with Legend serving as the operator. The objective is to locate nickel-copper and Tropicana gold mineralization in the Nova-Bollinger style.


The project has a longer duration. Indeed, a total of 12 contiguous Exploration Licenses covering an area of 2,792km2 have been granted. It is located 120 kilometers northeast of the Independence Group NL-owned Nova-Bollinger nickel-copper mine.


It is located along the strike of the massive Gravity anomaly that contains the Nova-Bollinger nickel-copper deposit, as indicated in the diagram below.


Nickel exploration is difficult, and locating a Ni-S body is much more difficult than discovering a normal gold deposit. As a geologist with limited experience in nickel exploration, I have been informed by reliable sources that locating a Ni-S body is extremely difficult. However, with the advancements in geophysical technology, it is now easier than ever, as I am informed.

9. Sibanye Stillwater Limited (SBSW)

Sibanye Stillwater, a South African mining firm, has typically focused on precious metals, but that is changing. Sibanye Stillwater is currently the largest producer of platinum in the world, the second-largest producer of palladium, and the third greatest producer of gold.


However, the corporation is expanding into green metals with five purchases in the battery metals sector. Sibanye announced in October 2021 that it would acquire nickel and copper mines in Brazil for $1 billion. The Santa Rita nickel mine, which is among the world's top ten nickel producers, has a capacity of 16,000 tons of nickel per year. Sibanye will also acquire a nickel processing facility in France for €65 million in July 2021.

The bottom line

As demand for electric vehicles (EVs) continues to expand at a breakneck pace, the nickel market has become an attractive target for both short-term speculators and long-term investors. According to industry predictions, the electric vehicle market alone is predicted to increase at a stunning compound annual growth rate of 29 percent over the next decade. As a result, several nickel companies have performed exceptionally well, with their stock prices increasing this year's respective time periods significantly.