Nickel Market Shows Resilience Amid Trade Tensions

• Nickel prices have rebounded from $14,000 to approximately $15,750 per ton after Trump reversed the Liberation Day tariffs, recovering about two-thirds of the $2,800 loss experienced when tariffs were initially announced.
• Ore prices are showing strength, trading higher than pre-announcement levels, with Indonesian and Philippine supply dynamics (including the Eid holiday impact and Philippine rainy season) contributing to market tightness.
• Chinese stainless steel production has grown at double-digit rates through the first part of the year, which is higher than most analysts expected, creating robust demand despite high inventory levels.
• Critical minerals companies, particularly those focusing on nickel, are positioned to benefit from geopolitical tensions and government programs aimed at securing supply chains, with Canada looking to accelerate funding in this sector.
• Recent industry developments include The Metals Company applying for mining permits under existing US legislation, new investment interest from Robert Yildirim (planning to deploy $2 billion in the nickel sector), and ongoing positive drilling results from companies like Ardea Resources, First Atlantic Nickel, and Talon Metals.

Nickel has demonstrated remarkable resilience in recent months, with prices rebounding significantly after initial volatility caused by trade tensions. According to Mark Selby, CEO, Canada Nickel, nickel prices recovered from lows of around $14,000 per ton to approximately $15,750 per ton following Trump's reversal of the Liberation Day tariffs. This represents a recovery of about two-thirds of the $2,800 per ton lost when tariffs were first announced.

The stabilization and subsequent rise in nickel prices highlight the underlying strength of the market fundamentals. While the entire supply chain experienced some price reductions after the tariff announcement, including ore prices, nickel pig iron (NPI) prices, and stainless steel prices, these reductions were not as severe as might have been expected. In fact, ore prices have already rebounded to levels higher than those seen pre-announcement.

"Ore prices have come off but are actually trading higher than where they were pre-announcement." 

This indicates that market participants see long-term value in nickel assets despite short-term turbulence.

Supply Constraints Supporting Price Floors

Several supply-side factors are contributing to the stabilization and potential growth in nickel prices. Indonesia, a major nickel producer, experienced a production slowdown due to the Eid al-Fitr holiday, which is described as "the biggest holiday in the Islamic world." This temporary reduction in output, combined with already low inventory levels among domestic smelters, has helped establish a price floor.

Additionally, while the Philippine rainy season is ending, there will be a lag before shipments can fully resume and replenish the supply chain. As Selby explains, "It takes a while for the supply chain to get refilled." This transition period creates a temporary supply constraint that supports prices.

The benchmark 1.5% Philippine ore has experienced price increases, reaching the highest levels since October 2023. The combination of these factors led to a notable inventory reduction in Shanghai, with Shanghai Metals Market (SMM) inventory decreasing by 2,702 metric tons week-over-week to 43,000 tons. This reduction partially offset the increase in London Metal Exchange (LME) inventories of approximately 4,500 tons.

Strong Demand Fundamentals

Demand for nickel remains robust, particularly in the Chinese stainless steel sector. Despite some analyst concerns about demand sluggishness, Chinese stainless steel production is trending at double-digit growth rates through the first part of the year, exceeding most market forecasts. This strong performance in a key consumption sector provides a solid foundation for nickel demand.

"Stainless in China has grown at double-digit rates through the first part of this year. That's crazy. That's even higher than what I was expecting." 

While inventories remain high, they have not continued to increase, suggesting a healthy consumption rate that is keeping pace with production.

Beyond stainless steel, the electric vehicle (EV) sector represents a growing source of nickel demand. While the transcript does not provide specific EV sector growth rates, Selby mentions "continued growth in stainless steel with a little bit of restocking and growth in the EV sector" as factors that could drive prices toward the $20,000 per ton level by year-end.

Geopolitical Context & Critical Mineral Status

Nickel's status as a critical mineral positions it favorably in the current geopolitical climate. With tensions between the US and China affecting global trade, countries are increasingly focused on securing supply chains for essential materials. This creates opportunities for nickel producers outside the major Chinese-Indonesian supply network.

Selby suggests that critical minerals companies, including those focused on nickel, should be "a big net beneficiary" of the current situation, particularly in countries like Canada that are looking to accelerate development of their resources. He mentions meeting with the new Canadian Minister of Energy and Mines and expects "the pace of funding and the quantum of funding really make a big step change" for critical minerals projects.

This governmental support for critical minerals development comes as countries seek to create "bargaining chips" and leverage in international negotiations. Nickel, classified as one of the "chunky critical minerals" that is "large enough in scale" to impact the economy, stands to benefit from this strategic positioning.

The Battery Show, with Mark Selby

Corporate Developments & Investment Interest

Several corporate developments highlight the ongoing investment interest in the nickel sector. The Metals Company, which is developing seabed mining for manganese nodules containing nickel, has seen its stock price increase approximately threefold in recent months. This surge follows their announcement that they will apply for mining permits under existing US legislation rather than waiting for the International Seabed Authority to finalize regulations.

Additionally, Robert Yildirim, from a successful Turkish conglomerate with experience in mining and ferrochrome production, announced plans to invest approximately $2 billion in the nickel sector. Selby describes this as "a big deal" from "someone who knows" the industry, signaling confidence in nickel's long-term prospects.

Other positive developments include Ardea Resources' successful infill drilling on their Kalgoorlie Nickel laterite project in Australia, with multiple drill holes showing nickel concentrations above 1% over 20-50 meters. This project is advancing with funding from major partners Mitsubishi and Sumitomo Metal Mining. First Atlantic Nickel and Talon Metals also reported encouraging drilling results as they progress toward feasibility studies.

Price Convergence & Market Maturation

An interesting development in the nickel market is the ongoing convergence of different nickel product prices. The gap between nickel pig iron (NPI) prices and nickel sulfate prices has narrowed to about 250 RMB per unit, down from a historical floor of about 300 RMB. Selby projects this gap may ultimately settle around 150-200 RMB per unit.

This price convergence indicates a maturing market where various nickel products are increasingly valued based on their nickel content rather than product-specific factors. The fact that nickel sulfate prices only declined modestly (5-8%) compared to LME nickel's 20% drop following the tariff announcement suggests that inventory levels throughout the supply chain are at "reasonable" levels.

For Investors

Nickel presents a compelling investment case based on recovering prices, supply constraints, strong demand fundamentals, and its strategic position as a critical mineral. The market has demonstrated resilience following trade-related volatility, with prices rebounding significantly and ore prices reaching multi-month highs. Demand remains robust, particularly from the Chinese stainless steel sector, while the growing EV industry promises additional consumption growth.

Government support for critical minerals development, particularly in Western countries seeking to reduce dependency on Chinese-controlled supply chains, creates a favorable policy environment for nickel projects. Recent corporate developments, including significant investment interest from experienced industry players and positive exploration results, further strengthen the sector's outlook.

While challenges remain, including potential market volatility due to geopolitical tensions, the fundamental supply-demand dynamics point toward continued strength in nickel prices, with potential to reach $20,000 per ton by year-end according to industry projections.