Nickel Market Shows Recovery Signs Amid Policy Support & Trade Tensions

• Nickel prices have moved to the upper half of the $15,000-$15,800 per ton range, with lithium prices up 20-30% in recent weeks, suggesting the battery supply chain may be entering a restocking cycle after prolonged destocking.
• The US has imposed 90%+ tariffs on Chinese graphite and is negotiating deals with Indonesia on nickel, part of broader efforts to reduce dependence on Chinese-controlled supply chains for critical minerals.
• Federal funding is beginning to flow to North American critical mineral projects, with companies like MP Materials receiving significant Department of Defense contracts, validating the sector's strategic importance.
• Canada Nickel has published six resource estimates totaling over 9 million tons measured and indicated, with three more resources expected by year-end, positioning the Timmins district to potentially exceed Sudbury's historical production.
• Large mining companies including BHP and South32 continue divesting nickel assets, with operations being acquired by specialized players and strategic investors who maintain longer-term conviction in the market.

The global nickel market is showing signs of stabilization after an extended period of price volatility and oversupply concerns. Mark Selby, CEO of Canada Nickel Company, provided insights into current market conditions during a recent interview, highlighting key developments that may signal the beginning of a recovery cycle.

Nickel prices have recently moved into the upper portion of their established trading range of $15,000 to $15,800 per ton, testing higher levels after touching the bottom of this range several weeks prior. Despite ongoing negative sentiment regarding demand fundamentals, Selby noted that prices for Mixed Hydroxide Precipitate (MHP), the primary product from High Pressure Acid Leaching (HPAL) operations, remain near all-time highs. This suggests robust absorption of new supply by the market, whether for conversion to Class I nickel or direct use in battery applications.

Battery Supply Chain Restocking Signals

A significant development supporting potential market recovery is the sharp rebound in lithium prices, which have increased 20-30% in recent weeks after spending 12-18 months at multi-year lows. Selby characterized this movement as potentially marking the end of a prolonged destocking period across the battery supply chain. 

"When you go through a destocking period, particularly when we went up that 10x parabolic run in the lithium market, people panic. People pile up all kinds of stuff." 

This refers to the massive inventory buildup that occurred during the previous commodity super-cycle.

The restocking phenomenon is particularly relevant given Chinese buying patterns, which tend to be concentrated and create sharp price movements when market participants shift from purchasing only immediate needs to building strategic inventory positions. This behavioral pattern has historically preceded significant price appreciation cycles in battery materials.

Geopolitical Factors

US-Indonesia Nickel Agreement

The United States has reached a preliminary agreement with Indonesia regarding nickel trade, implementing a 19% tariff structure that provides preferential treatment compared to other suppliers. This development is significant given Indonesia's dominant position in global nickel production, though much of this capacity is controlled by Chinese entities. Selby noted that modifications to the Inflation Reduction Act have tightened restrictions around Chinese ownership of critical mineral operations, creating uncertainty about whether US defense industries will continue relying on Chinese-controlled Indonesian nickel production.

Critical Minerals Security Initiative

The broader US strategy to reduce dependence on Chinese supply chains has accelerated significantly, with concrete policy actions replacing previous rhetoric. The government imposed tariffs exceeding 90% on Chinese graphite imports, creating immediate market disruption but providing protected space for North American graphite development. This follows similar actions across multiple critical minerals, including rare earth elements, which have experienced substantial price increases.

"Governments are finally getting serious about critical minerals. You are going to see money start to flow." 

Selby noted that federal funding mechanisms are beginning to activate after years of policy discussions without substantial financial commitments.

Government Funding & Industry Validation

Strategic Investment Program Results

The Department of Defense's recent contract award to MP Materials represents a watershed moment for the North American critical minerals sector. The company's valuation increased from approximately $2.5 billion to $10 billion following the announcement. This dramatic revaluation demonstrates investor recognition that government backing can fundamentally alter project economics and risk profiles.

The positive impact extended beyond direct recipients, with Energy Fuels and other rare earth companies experiencing similar valuation increases despite not receiving contracts. This suggests market participants view government involvement as validation of sector-wide opportunity rather than isolated project support.

Canadian Policy Response

Canadian federal and provincial governments have accelerated critical minerals initiatives, partly in response to potential US trade actions under the Trump administration. Selby indicated that discussions with government officials have progressed favorably, with funding decisions expected through the fall period. The government previously provided support to Nouveau Monde Graphite, one of Canada's leading graphite development projects, establishing precedent for continued sector investment.

Interview with Mark Selby, CEO of Canada Nickel Corp

Company-Specific Developments

Canada Nickel Resource Expansion

Canada Nickel Company has published resource estimates for six deposits within the Timmins Nickel District, totaling over 9 million tons of measured and indicated resources plus an additional 9 million tons of inferred resources. With three additional resource estimates planned for release by year-end, the company is positioning the district to potentially exceed Sudbury's historical production of approximately 19 million tons.

"We're on track to really truly become the world's largest nickel sulfide district."

The company received $35 million in exploration funding from Agnico in early 2024, enabling the comprehensive drilling program that generated these resource estimates.

Industry Consolidation

The nickel sector continues experiencing significant ownership changes as major mining companies exit the market. BHP completed its withdrawal from a partnership with LifeZone Metals, allowing the latter to acquire full project control. The simplified ownership structure should facilitate future development decisions and financing arrangements.

South32 divested its Cerro Matoso operation in Colombia to CoreX, controlled by Turkish billionaire Robert Yildirim. Despite being a 30-year-old operation with declining ore grades and environmental liabilities, the asset attracted strategic investment from an operator planning to deploy $2 billion across the nickel sector. Yildirim's recent acquisition of high-grade laterite resources in Ivory Coast suggests potential plans to supplement existing operations with premium feedstock.

Market Structure & Supply Dynamics

Indonesian Production Management

The Indonesian government has implemented policy changes designed to manage ore supply and support higher prices. Licensing terms have been reduced from three-year to one-year periods, providing greater regulatory control over production volumes. Ore prices have increased to near two-year highs, requiring comparison to fall 2023 levels when nickel prices were substantially higher.

Chinese-controlled producers, particularly Tsingshan and other integrated operators, are using these price pressures strategically to maintain Nickel Pig Iron (NPI) and stainless steel production at high volumes while keeping prices relatively low. This approach aims to pressure competitors with higher operating costs, though such strategies have sustainability limitations.

Russian Production Constraints

Norilsk Nickel, now Nornickel, historically producing 20% of global supply but now representing approximately 6% of the market, has reduced production guidance by 5%. International sanctions have created equipment procurement difficulties, hampering maintenance and expansion activities necessary to sustain production levels. While significant resources remain in northern Siberia, operational challenges and environmental obligations limit growth potential.

Investment Landscape

Institutional Interest Revival

After a 15-year absence from the mining sector, institutional investors are beginning to evaluate opportunities based on risk-return profiles that favor commodity investments over broader equity markets. Mining company valuations remain at fractions of other sectors, creating potential value opportunities for long-term investors.

"You are seeing investors who may not have looked at the space for 15 years, in some cases 20 years. You have to go back to the mid-2000s before some of these guys got this excited about what's happening in the mining space."

Government Funding Catalysts

The combination of strategic necessity and favorable valuations is attracting different types of institutional investors willing to write larger investment tickets. Government funding announcements serve as catalysts for broader investment flows, as demonstrated by the MP Materials contract impact across the sector.

However, the recovery remains concentrated among advanced development projects rather than early-stage exploration companies. Successful government-backed projects may create demonstration effects that eventually broaden investment appetite across the development spectrum.

Summary & Investment Implications

The nickel market appears to be transitioning from a prolonged correction phase toward potential recovery, supported by multiple converging factors. Government policy initiatives are providing both market protection through tariffs and direct investment through strategic contracts. Early indicators suggest battery supply chain restocking may be beginning, potentially driving increased demand for nickel and related materials.

Corporate restructuring continues as major mining companies exit the sector while specialized operators and strategic investors acquire assets at attractive valuations. Resource development projects in politically stable jurisdictions are benefiting from renewed government support and gradually improving investor sentiment.

The combination of geopolitical tensions, supply chain security concerns, and improving market fundamentals creates a potentially favorable environment for North American nickel development projects. However, sustained recovery will depend on continued government policy support and validation through successful project execution across the sector.