Nickel Price Recovery in 2024 on Emerging Supply Squeeze Signals

• Nickel prices have traded between $16,000-17,000 per tonne since mid-December, with some short-lived dips below $16,000
• EV supply chain continues buying nickel during Chinese New Year, indicating ongoing restocking
• Stainless steel demand grew 13% in China last year, positive sign for future nickel demand
• Canada Nickel announced plans for North America's largest nickel processing facility to add value for its mine production
• Government funding programs now synced up with Canada Nickel's development timeline, expects financing support announcements through 2024

The Outlook for Nickel in 2024

Nickel prices have stabilized over the past couple of months after a volatile 2022, trading in a range between $16,000-17,000 per tonne since mid-December. According to Mark Selby, CEO of Canada Nickel Company, there have been some short-lived dips below $16,000, but overall the market appears to have found a bottom.

Selby pointed to signs of restocking demand emerging in the electric vehicle (EV) supply chain. Despite Chinese New Year typically marking a slowdown in economic activity, EV manufacturers in China continue purchasing nickel, indicating an ongoing recovery. “That’s a good sign and a good sign that you know this this restocking is happening,” explained Selby.

He expects the post-Chinese New Year period in late February will provide further evidence whether this demand revival has momentum. “Fingers crossed a few green shoots, and we'll see whether they where they continue to grow,” said Selby. With nickel being a critical mineral for EV batteries, sustained purchasing activity could signal a turning point for nickel prices after last year’s decline.

The Battery Show, with Mark Selby

Outlook for Stainless Steel Sector Also Positive

While EV batteries have been the key demand driver for nickel in recent years, stainless steel manufacturing remains an important end-market. Here too, Selby sees reasons for optimism. Despite broader economic headwinds last year, he noted that stainless steel demand in China grew 13% in 2023. The higher nickel-containing 300 series stainless steel grades expanded 11%.

Although there was destocking in Europe and North America that partially offset China’s gains, Selby believes the latest industry data reinforces the upside for nickel. He expects over 10% global growth in stainless demand this year, fuelled by a restocking cycle as nickel prices recover.

“Again, the kind of capitulation news that we've seen for last bit just helps reinforce that you know you are close to a bottom, and supportive of what what I think will happen through the course of 2024,” stated Selby.

With both the EV battery and stainless steel markets signalling higher nickel requirements ahead, he forecasts prices climbing back towards $20,000 by the end of this year.

Canada Nickel Advancing Domestic Processing Capacity

As one of only a few potential new nickel mines globally that could commence production before 2030, Canada Nickel has also been focused on downstream processing. This covers converting mine output into the high-purity nickel products required by battery manufacturers and stainless steel makers.

Last week, the company unveiled plans to build North America’s largest nickel processing facility in Timmins, Ontario. This will be achieved through a multi-phase capacity expansion able to handle feeds from Canada Nickel’s Crawford mine as well as third-party sources.

Selby highlighted how the existing nickel processing industry comprises just a handful of smelters functioning as an oligopoly. By expanding domestic capacity in Canada, the project would give more control to mining companies in capturing value from production. The planned facility also intends to utilize technologies with a small environmental footprint and recycle any carbon emissions generated.

“This missing link that no one's talking about building in North America, that’s exactly what the market needs exactly what the governments needs,” noted Selby on the significance of this processing investment.

With Crawford aiming to begin commercial production in 2027, constructing this downstream capacity in time for the mine’s ramp-up would allow Canada Nickel to maximize profits.

Government Financial Assistance Expected

Developing the Crawford mine and affiliated processing facilities requires substantial capital investment. Selby has indicated that the company is targeting completion of permits and formal construction approval by mid-2025. This would necessitate having financing arrangements secured by the end of next year.

He outlined during the interview that both the federal and provincial governments in Canada have announced critical mineral funding programs that align with Canada Nickel’s project timelines. These are expected to cover portions of engineering studies, equipment purchases, and construction costs.

“I would say to be honest for the first three or four years of our existence, that first mover was almost a disadvantage,” stated Selby, referencing the speed of Crawford’s development. “The nice thing is now the programs are there and we're largely in sync with that.”

In addition to direct government assistance, partnership agreements with strategic investors like Anglo American and Samsung also provide capital cost relief for Canada Nickel. Combining financing from these various sources, Selby expressed confidence in having a complete funding package in place over the next 12-15 months.

The Investment Thesis for Nickel

For investors evaluating the nickel sector currently, the bull case rests on:

• Fundamentals indicate global nickel demand exceeding available supplies this decade due to EV battery manufacturing needs and stainless steel output growth
• Major western economies designating nickel as a “critical mineral” and providing financial aid for domestic mining and processing projects
• Price recovery upside as nickel inventories remain low and new production sources limited until at least 2025/2026

Specifically for Canada Nickel Company as an investment opportunity, the highlights are:

• 100% ownership of a large, low-cost nickel sulphide deposit in a mining-friendly Canadian jurisdiction
• Potential to be among only a handful of new nickel mines developed this decade to alleviate looming shortfalls
• Downstream processing facility plans capturing additional value from mine production and low-carbon approach enhancing marketability
• Strong financial backing from leading global companies and positioning for government project funding in 2024

In summary, Canada Nickel appears well-positioned to capitalize on the nickel market's structural deficits emerging. While delays are possible, the current trajectory targets production before most peers. Its integrated business model also allows greater margins across the value chain.

Key Takeaways

Despite price volatility over the past year, demand drivers underpinning nickel's strong long-term outlook remain intact. Vehicle electrification and clean energy requirements ensure nickel will see robust end-market usage this decade. With few new mining projects on the horizon, Canada Nickel's Crawford asset is strategically vital for North America's nickel self-sufficiency and net-zero objectives. Its recent processing infrastructure announcements additionally reinforce the company's advantages versus peers. While exercising prudent risk management, nickel-focused investors should keep Canada Nickel on their radar into 2024 and beyond.