Unlocking the Power of Nickel: Fueling Tech and Clean Energy

In today's rapidly evolving technological landscape, critical minerals play a pivotal role in driving innovation and sustainability. Among these essential elements, nickel stands out as a cornerstone for modern technology and clean energy solutions.

From powering our smartphones to advancing medical applications and driving the electric vehicle revolution, nickel's significance cannot be overstated. The U.S. Department of Energy’s Office of Fossil Energy and Carbon Management (FECM) underscores the importance of developing a robust domestic supply of critical minerals, including nickel, to bolster America's economic growth and achieve net-zero greenhouse gas emissions.

Critical minerals like nickel are essential to the U.S. economy, yet their supply chains are vulnerable to disruptions. The U.S. Geological Survey identifies nickel as one of the 50 critical minerals vital for various technological advancements and clean energy solutions. Nickel is indispensable in manufacturing lithium-ion batteries, which power electric vehicles (EVs), and in producing components like tubes, rods, wires, and sheets for various industrial applications.

Despite its abundance, the nickel market faces challenges. According to Macquarie Bank, slow mine permit approvals in Indonesia could curb ore supplies, potentially leading to a nickel deficit. The metal, which rebounded on the London Metal Exchange after a sharp decline in 2023, underscores the dynamic nature of the nickel market and the need for strategic investments and developments in nickel mining.

As we delve deeper into the evolving landscape of nickel mining, the critical role of this mineral in driving technological advancements and sustainable solutions becomes clear.

Keep reading as we explore the market trends, investment opportunities, and the future of nickel mining.

Securing Domestic Supplies

In a significant step towards securing a domestic supply, the United States broke ground on a nickel and cobalt plant in Lawton, Oklahoma, in September 2023. This plant marks the first of its kind in America, highlighting the critical importance of nickel ore for the future. As the fifth most common element, nickel's resilience to extreme temperatures and its corrosion resistance make it ideal for numerous industrial applications, including stainless steel production and EV batteries.

Nickel's recyclability further enhances its value, allowing it to retain usability better than many other elements. With world reserves found in around 25 different countries, nickel ore deposits are typically mined from sulfide and laterite deposits.

The most common uses of nickel today are in stainless steel production and electric vehicle batteries, with smaller amounts used for plating and nickel-based alloys. Nickel's recyclability enhances its value, as it maintains usability better than many other elements.

The Potential Nickel Deficit: What Investors Need to Know

The global nickel market might face an unexpected deficit this year if Indonesian mining permit approvals continue to lag. Initially, a surplus of less than 40,000 tons was forecasted, but this outlook is now uncertain. Delayed approvals could see local production growth fall below 13%, impacting global supply.

Nickel prices dropped 45% last year due to a supply surge from Indonesia that outpaced demand from the stainless steel and battery industries. However, slow permit approvals this year have prompted government action to speed up the process. Meanwhile, Chinese stockpiles might be smaller than previously estimated due to higher-than-expected consumption, suggesting the market is more balanced than earlier thought.

In Indonesia, nickel ore is trading at a premium of over $7 a ton above the government-set minimum price, potentially adding $700 a ton to production costs. This could relieve pressure on miners and smelters in other regions, who are struggling to compete with Indonesia’s low-cost production.

Nickel prices are currently around $17,585 a ton on the London Metal Exchange, with a recent 10% rise due to Indonesian permitting delays. Investors should monitor these developments, as a potential shift from surplus to deficit in the nickel market could significantly impact prices and investment opportunities.

The Quiet Race for Nickel

Nickel, a critical mineral essential for electric vehicle battery production, is at the center of a strategic race. Extracted minerals like cobalt, lithium, and manganese are primarily processed in China, but nickel processing is more globally dispersed.

This is partly due to Indonesia’s various bans on nickel ore exports from 2009 to 2020, which led Chinese companies to invest $14.2 billion in constructing industrial parks and nickel smelters on two Indonesian islands with significant nickel reserves. Indonesia’s measures impact supply chains for corrosion-resistant steel, aerospace applications, and electric vehicle batteries.

Earlier this year Australia listed nickel as a critical mineral, to unlock billions in support for securing its supply. While some western countries continue to buy nickel from Russia’s mining sector, the UK recently banned Russian nickel imports, while other European companies continued buying Russian nickel and other metals from firms close to the Kremlin after the invasion. The European Policy Centre estimates that up to 90% of some types of nickel used in Europe comes from Russian suppliers.

Indonesia's revenue from nickel mattes and sinters surged from $784 million in 2019 to $6.72 billion in 2022. However, replicating this success in Latin America or Africa may be challenging. As the source of half of the world's nickel production, Indonesia was a crucial partner. While bans may not be necessary elsewhere, companies are already establishing processing operations in countries like Tanzania (nickel) and Mauritius (graphite) to secure long-term mineral supplies.

Nickel deposits are found in two primary types: sulfide deposits and laterite deposits. The Nickel Institute notes that world nickel reserves are spread across approximately 25 countries, making it a widely available yet highly sought-after resource.

As the demand for electric vehicles continues to rise, the competition to secure and process nickel intensifies. Countries and companies are vying for control over this vital mineral to ensure a stable supply for the growing EV market.