The price of nickel could double as demand grows for stainless steel and batteries
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Nickel miners are a lot more optimistic about the market than they have been in a long time thanks to strong demand for stainless steel and lithium-ion batteries to power electric cars.
Rising demand, accompanied by declining stockpiles and a lack of new mines coming into production, saw the price of the base metal hit a three-and-a-half year high of $US15,700 a tonne in April.
The price has come off in recent weeks — and it’s a long way from a peak of $US54,000 ten years ago — but mining researcher Wood Mackenzie is predicting a long-term price of around $US25,000.
That’s a price not seen since the first half of 2011 (see graph below).
That’s good news for ASX listed nickel stocks. About 60 per cent of the 50-or-so ASX companies with exposure to nickel have made gains in the past year.
>> Scroll down for a list of ASX juniors with exposure to nickel
Leading the pack is Ventnor Resources (ASX:VRX) which at around 5.8c is trading at nearly five times its price this time last year.
Australian Mines (ASX:AUZ) is up 370 per cent at 8c compared to a year ago while Jervois Mining (ASX:JRV) has climbed about 174 per cent to 31.5c.
BHP (ASX:BHP), which only just last year announced its foray into the battery metals market, is already selling about 60 per cent of its nickel to the battery sector.
And the major expects to be selling as much as 90 per cent by the end of next year, BHP Nickel West asset president Eduard Haegel told attendees at the Diggers & Dealers Mining Forum in Kalgoorlie this week.
“We’ve already today achieved over 60 per cent and expect to achieve 70 per cent by the end of this calendar year,” he said.
“I believe that we have timed our entry into the battery and nickel sulphate markets well. Interest by customers and potential customers is significantly exceeding expectations.”
This proves that battery market demand is “very, very real”, according to John Prineas, executive chairman of junior nickel explorer St George Mining (ASX:SGQ).
“We’re seeing ourselves, interest from battery manufacturers,” he told Stockhead.
“That’s sort of pointing to maybe a crunch in about two or three years in the nickel sulphide market and very good escalation of prices.”
Nickel sulphides are much cheaper to turn into battery grade nickel sulphate than nickel laterites and will fetch a premium price.
Location, location, location
St George Mining, which has a market cap of about $40 million, has a project in the same region of Western Australia that BHP and Western Areas (ASX:WSA) have nickel projects.
In the past 12 months, the stock has gained 30 per cent to trade at around 13c.
St George is exploring the Mount Alexander project that used to be owned by BHP.
As soon as St George acquired the project in 2015 it started drilling immediately and hit high-grade nickel sulphides from just 30m below surface.
The company has now defined nickel sulphide mineralisation over a 4.5km strike length.
St George has had interest from battery makers in Asia, Mr Prineas said.
“They have approached us. I can’t say much more because it’s confidential, but it tells us that this increase in the market interest is very real.”
Shortfall on the horizon
The nickel market is heading for a deficit of between 100,000 and 140,000 tonnes, Western Areas boss Dan Lougher told delegates at Diggers and Dealers.
“The good news is we believe now there is going to be a structural change,” he said.
London Metal Exchange stockpiles have slipped below 250,000 tonnes on the back of current stainless steel demand.
The stainless steel market is still the biggest driver of nickel demand, but the increasing shift to a different lithium-ion battery chemistry that requires more nickel and less cobalt will also help.
“The largest Chinese stainless steel producer, Tsingshan, who is one of our partners has got huge growth,” Mr Lougher said.
“These guys are going to need another 400,000 tonnes of nickel just to meet their stainless steel demand.”
Here’s a list of ASX-listed stocks with exposure to nickel. (We include here stocks that are primarily nickel-focused as well as those with nickel side projects)
Swipe or scoll to reveal full table. Click headings to sort