Nickel Prices Rally Amid Signs of Chinese Economic Resurgence

This summary highlights the key points from our most recent Battery Metals interview series dated May 19th, 2023, spotlighting Mark Selby, the Chairman & CEO of Canada Nickel. A successful fundraiser, Selby has managed to accumulate over $100 million, propelling nickel-cobalt projects towards readiness for construction. His vast industry knowledge is backed by senior roles at RNC Minerals, where he spearheaded the development of the Dumont nickel-cobalt project, a heavyweight with the world's second-largest nickel reserve and ninth-largest cobalt reserve. Besides these, Selby's stints at Inco and Purolator Courier have cemented his status as a prominent figure in the nickel domain since 2001.‍

Nickel Price Update

Nickel prices have breached the $20,000 mark, aiming for the $22,000 threshold that hasn't been surmounted since 2021. The underlying sentiment suggests that any price break may be temporary as cost structures have escalated—a topic we will delve into later. Anticipation is high that nickel will hover within this range for a while. Factors likely to propel a breakout include clear evidence of Chinese economic recovery, robust growth in battery demand, or a pause in interest rate hikes. [link]‍

Battery Metals Restock and the Anticipated Surge in Nickel Demand‍

Various reports have confirmed a resurgent restocking trend in battery metals, courtesy of the rebounding lithium prices—a fact validated by some significant lithium market players.

We're keenly observing the potential surge in battery sector demand and the timing of nickel demand recovery. The critical question to be answered is whether we're on the cusp of witnessing a significant discount compression (signified by lower LME prices and reduced intermediate discounts).‍

INSG Data, Cost Pressures, and the Intricacies of Nickel Production Economics‍

The recently released INSG monthly data reveals surpluses in the initial four months of the year. Intriguingly, these inventories seem to be invisible—an issue often referred to as the "great compression." It's plausible that demand is being underrepresented while supply is overstated. Given that 90-95% of NPI production costs are variable, there's minimal incentive to produce. An informative note from a Macquarie analyst sheds light on cost pressures. The downside price risk is circumscribed due to NPI and FeNi pricing being significantly discounted compared to LME prices. This illuminates the proximity of costs to current prices. Rising nickel costs are being fuelled by coal, sulfur, and dwindling cobalt prices, which, although having decreased slightly, still linger at elevated levels. [link]‍

Company News‍

One noteworthy development involves Mallee Resources. Their upcoming production restart and public listing promise new dynamics in the market. They plan to revive the Avebury Mine, which closed approximately a decade and a half ago. Despite the sizeable resource, the mine faced hurdles in producing on-spec concentrates (Arsenic) and maintaining low operational costs. The reintroduction of new production to the market is a positive move, but caution should be exercised. Prospective investors ought to either wait for the results or familiarise themselves with Mallee's strategies to mitigate these issues. The recent closure and subsequent insolvency of the Minto Mine, initially a Capstone Copper mine, should serve as a cautionary tale. [link]

FPX Metals has reported encouraging metallurgical results in producing nickel sulfate from their concentrate. This success underscores another advantage of certain ultramafics, which have limited metallic impurities compared to high sulfide deposits containing trace amounts of various other elements. [link]‍

Conclusion‍

As we navigate through the intricate dynamics of the nickel market, it becomes evident that the future hinges on several critical factors. The Chinese economic resurgence, bolstered battery sector demand, and potential restocking trends in battery metals, underscored by lithium's price recovery, set the stage for an optimistic Q4/23 outlook. However, the so-called "great compression" presents a complex scenario of surplus yet invisible inventories, suggesting underreported demand and potentially overstated supply. Rising production costs, due in part to fluctuating coal, sulfur, and cobalt prices, also play a significant role in shaping the nickel landscape. With the planned restart of operations like the Avebury Mine by Mallee Resources, and promising metallurgical advances from FPX Metals, the market shows signs of positive momentum, but it is not without its challenges and risks. Therefore, investors and industry players alike need to navigate with caution and astute awareness of these market intricacies.‍‍

About Canada Nickel

Leading the charge in the next era of nickel-sulphide projects, Canada Nickel Company Inc. is working diligently to meet the surging demand from the booming electric vehicle and stainless-steel sectors. The company has actively pursued trademarking the phrases NetZero Nickel™, NetZero Cobalt™, and NetZero Iron™ across various jurisdictions, underscoring its commitment to developing processes that yield net zero carbon nickel, cobalt, and iron products. By investing in Canada Nickel, shareholders gain exposure to the promising nickel market within the low political risk jurisdictions. The company's endeavours are anchored by its 100% owned flagship, the Crawford Nickel-Cobalt Sulphide Project, strategically located in the thriving Timmins-Cochrane mining region.

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