Nickel: Indonesia Supply Flat as Operational Issues Hit. Consumption Up 5% Y-o-Y

• Nickel prices have seen some volatility recently due to concerns over Chinese growth and potential impacts of Trump tariffs, but have bounced back over $16,000/ton
• Indonesia mine supply growth has been flat year-over-year for the last several months and there is no growth in Philippine production, supporting nickel prices
• The International Nickel Study Group reports nickel demand is up 5% and supply up 4% through September, with the surplus running at 92,000 tons year-to-date
• Several nickel projects are reporting positive drilling results, including high-grade nickel sulfide discoveries by Canada Nickel and Asian Battery Metals
• Alliance Nickel released a positive feasibility study for its nickel-cobalt heap leach project, though cobalt pricing weakness could be a risk factor

The nickel market has experienced some turbulence in recent months amidst geopolitical uncertainties and macroeconomic concerns. However, underlying supply and demand fundamentals remain supportive of nickel prices going forward.

Recent Price Action 

Nickel prices have seen some volatility in the aftermath of the U.S. presidential election. Mark Selby, CEO of Canada Nickel Company, noted that 

"As soon as Trump won this thing, we saw a whack of pressure right across the board on the base metals."

This selling pressure took nickel prices back down to lows around $15,500/ton that were seen earlier in the year. However, prices have since bounced back, with Selby commenting that 

"What was good was we did bounce off it, and we popped back up over $16,000 a few times and we're sitting there right now."

Supply & Demand Fundamentals 

Looking at the fundamentals, the International Nickel Study Group reported that through September, nickel demand increased by 5% year-over-year while supply rose 4%. Notably, Indonesian mine supply growth has been flat in recent months.

The fact that they've had to import so much ore from the Philippines is really highlighting the issue of ore availability in Indonesia and maybe it's not such an unlimited one-way supply.

He believes this supply picture, combined with the onset of the Philippine rainy season curtailing production there over the next few months, will "squeeze supply in Indonesia and set the stage for nickel prices to move back towards $20,000/ton in early 2025.

Interview with Mark Selby, CEO of Canada Nickel Corp

Project Development and Exploration 

On the company front, several nickel explorers and developers have reported encouraging progress. Canada Nickel announced a new high-grade discovery at its Bannockburn project, intersecting 4 meters at 4% nickel within a wider 12 meter interval at 1.6% nickel.

In Mongolia, high grade massive sulphide results from Asian Battery Metals reported a significant step-out hole at its drilling project, cutting 19.3 meters of combined massive to semi-massive sulfide mineralization. The discovery hole had previously returned 8.8m at 6.08% copper, 3.19% nickel, and 1.63 g/t precious metals.

In Australia, Alliance Nickel released results from feasibility study – results look reasonable from capex/opex perspective – Average annual production of ~20,000 t nickel and ~1,600t cobalt over the first 12 years with First quartile All-in Sustaining Cost (AISC) of US$4.84/lb nickel (first 12 years)and  Pre-production capex of A$1.65 billion (including contingency and pre-stripping) utilising low capital heap leaching process.  LOM post-tax NPV8 of A$1.5 billion, IRR of 17.6% and payback period of 5 years. The risk is that they don’t have a heap leach process operating today, and considering a sulphate premium (which may exist for an IRA-compliant supply, but we need to see), they have an off-take with Stellantis.  The challenge for leach and new HPALs will be cobalt pricing as cobalt is worked out of batteries and lots of supply coming from the Congo and Indonesian MHP operations

Prony (Goro) restarted after six-month shutdown because of riots in New Caledonia.

Premium Resources (they’ve dropped the nickel out of their name !) continues to have infill results from their Selebi properties

Some good results from companies with their 2^nd properties:

More good results from Talon Metals from their Michigan properties – interesting well-mineralized long intervals at shallow depth. Drill Hole 24BD0003: Encountered a 110.3m interval of mineralized (copper-nickel) intrusion from only 9.59m depth and ranging in mineralization up to 40% sulphides; Drill Hole 24BD0004: Intersected multiple mineralized (copper-nickel) intervals, the most notable being a 61.91m interval from 13.18 to 75m, containing sulphide concentrations between 3-25%.

FPX Nickel put out good surface sampling confirming mineralization at their Mich property in the Yukon. The Mich Central zone, as defined by surface rock sample results, has been increased to 2.2km in length by up to 575m in width with DTR (Davis tube recoverable) and other nickel grades  

Geopolitical Factors 

With the divided U.S. government after the elections, the consensus view is that EV subsidies may be scaled back but the broader package of incentives supporting development of critical minerals supply chains in North America is likely to remain in place under the Inflation Reduction Act (IRA).

In the end they'll slap tariffs on all things Chinese and create lots of incentives for North American production. For the nickel assets in safe countries like Australia, Canada, and so forth, we'll continue to remain in good shape and see significant incentives for bringing this new production on in North America.

The Investment Thesis for Nickel 

For investors evaluating the nickel space, the key points to consider are:

• Constrained supply growth, with Indonesian production flattening and no material gains in Philippine output, is likely to support higher prices especially during the seasonally weaker months ahead
• Increasing EV battery demand for nickel sulfate, coupled with expected cuts to Russian supply from the Norilsk operations, should tighten the market over the medium term
• Companies with high-quality nickel sulfide assets in stable jurisdictions like Canada, Australia and the U.S. are well-positioned to benefit from IRA incentives and secure offtake agreements with major automakers
• Attractive entry points may be available after the recent selloff - historically, development-stage nickel assets have seen substantial re-rates once the broader investment narrative shifts to impending deficits

While not without risks, the nickel market appears poised for an eventual rebound based on the tightening supply and demand outlook. Current price levels may offer a favorable risk/reward setup for long-term investors. As always, conducting thorough due diligence on individual company fundamentals remains paramount before allocating capital to the space.

The geopolitical backdrop of U.S.-China trade frictions and the global energy transition should provide multiyear tailwinds for nickel demand. By carefully selecting top-tier assets and management teams, investors can position for potential outsized gains as the electric vehicle revolution accelerates in the years ahead.