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Dwindling Nickel Supply: Is There a Buying Opportunity?

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The recent surge of oil prices has once again fuelled the push for alternative energy solutions in regards to transportation. One of the rapidly growing industries today in this sector is the electric vehicle market. Tesla company alone has experienced a surge in deliveries for the past couple of years.

source: https://www.statista.com/statistics/502208/tesla-quarterly-vehicle-deliveries/

One of the key components in manufacturing electric vehicles is precious minerals. A few of these are categorized as rare earth elements , (REE) which are used in both the battery and engine. For lithium-ion batteries, nickel is in high demand due to its capability to provide higher storage capacity and energy density. Experts predict that cathodes may soon be composed of 90% nickel for some cell types.

Demand for Nickel in the EV Industry

As electric vehicles grow in popularity with consumers, manufacturers are finding it harder and harder to secure suppliers that can steadily provide nickel. Elon Musk has even stated this back in July 2020 during a post-earnings call: “Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way.” (source: https://www.reuters.com/article/us-tesla-nickel-idUSKCN24O0RV) It was made clear that a reliable nickel supply is a significant factor when it comes to ramping up production and lowering costs.

source: https://www.mining.com/nickel-demand-for-evs-to-outpace-lithium-and-cobalt-report/

It is estimated that nickel has a 20 billion US dollar annual market. The EV industry demand alone is estimated to grow by around 567% by 2025. Other industries that use nickel include stainless steel and special steel production, electroplating among others.

Demand Outstripping Supply

According to an analysis by Rystad Energy, as early as 2024, the global supply of nickel will no longer meet the forecasted demand of 3.4 million tonnes. While nickel consumption for battery production is rapidly growing, it only makes up for 10% of the entire demand. Majority of it still goes to the stainless steel industry with over 70% of demand.

source: https://knoema.com/ydolvrc/nickel-price-forecasts-long-term-2021-to-2030-data-and-charts#

The global nickel reserves as of 2020 is around 94 million metric tons with top countries such as Indonesia, Australia, and Brazil. China on the other hand is the biggest producer and consumer of refined nickel for its industrial use.

source: https://knoema.com/ydolvrc/nickel-price-forecasts-long-term-2021-to-2030-data-and-charts#

Despite the demand uptrend, the finite reserves and limited discoveries of new potential sources may eventually hamper the growth of various industries including electric vehicles.

Rising Prices

Various forecasts and studies mentioned above indicate a possible long term price appreciation for nickel. But due to the nature of rare earth elements having an intricate process of mining, refining, and delivery, disruptions in the supply chain may cause sudden and unintended price spikes.

A recent example of this is the current Russia-Ukraine conflict which caused panic to the London Metal Exchange on March. Nickel prices doubled and shot up to $100,000 per ton and LME was forced to temporarily suspend trading.

Meanwhile, back in August 2019, Indonesia, the country that holds a quarter of the global nickel supply, announced that they will ban nickel ore exports and focus on their own processing facilities.

Future for Nickel

The world is gradually shifting to innovations that are based on renewable energy. While no one can exactly tell the future value of nickel, I believe that it will play an important part in the years to come.

Please note that this is entirely my own opinion and is not financial advice. Thank you for reading.