Nickel's Price Dip Hides a Tightening Market

• Nickel prices declined recently on US dollar strength and reports on Indonesia's possible expansion of mining quotas. Selby attributes the move to Chinese buyers and short-sellers applying pressure during the peak seasonal ore-supply window from the Philippines.
• A roughly 40,000-ton drawdown in nickel pig iron (NPI) inventory, converted into higher-value matte, has narrowed the NPI discount to LME nickel prices from a historical ~$250/ton to $150/ton which is an indicator of underlying market tightness despite headline price weakness.
• Nickel demand tied to electric vehicle batteries rose 37% year-to-date through May. Even though EV unit sales grew only about 2%, there is a divergence which Selby attributes to a 12% increase in average battery pack size as consumers shift toward larger vehicles.
• Canada Nickel signed a memorandum of understanding with German utility RWE to develop supply and trading arrangements for low-carbon nickel-chrome-magnetite products aimed at Europe's carbon-conscious steel market.
• Peer developments include Magna Mining's $140 million investment from South American investor Alpayana (positioning it primarily as a copper/PGM story) and continued disruption at Sherritt International tied to US executive orders affecting its Cuban operations.

Mark Selby, CEO of Canada Nickel Company, covers recent movements in nickel pricing, supply-side indicators from Indonesia and the Philippines, demand trends linked to electric vehicles, and corporate developments across several nickel-exposed companies. For investors tracking battery metals and nickel-development companies, the insights offers context on both near-term price volatility and the longer-term supply and demand factors shaping the sector.

Nickel Price Pressure and the Indonesia-China Dynamic

Nickel prices have drifted lower recently, a move Selby links partly to broader US dollar strength affecting the base metals complex generally. Layered on top of that has been market commentary suggesting Indonesia may allocate additional mining quotas, which has weighed further on sentiment.

Selby frames this as a seasonal dynamic combined with market positioning. The second quarter is the period of maximum nickel ore availability from the Philippines, since roughly half of Philippine ore production occurs during this window. As he explains, 

"This June-July period has maximum ore availability. If you're going to try and push the market down, this is the time of year that you would do that." 

As the rainy season sets in across Philippine mining regions, ore availability is expected to decline progressively through the remainder of the year, a pattern Selby says previously contributed to a price rally at the end of last year when supply was at its seasonal low.

Selby's interpretation is that Chinese buyers, and potentially short-sellers, are using this seasonal supply peak to pressure Indonesia into releasing more ore quota, framing it as leverage rather than a genuine change in the underlying supply-demand balance. He draws a historical comparison to the 2022 London Metal Exchange nickel squeeze associated with Tsingshan's founder, who held a large short position that was ultimately caught out by a rapid price spike. Selby suggests any current pressure campaign is likely to persist for a few more weeks before, in his view, that the fundamentals will reassert themselves. He also reiterated an earlier price expectation of nickel moving back toward the $20,000 per ton level.

Signs of Underlying Tightness: The NPI Inventory Drawdown

While headline nickel prices have softened, Selby points to indicators within the supply chain suggesting tighter conditions than the spot price implies. He highlights a roughly 40,000-ton drawdown in nickel pig iron (NPI) inventory, converted into nickel matte, driven by elevated prices for mixed hydroxide precipitate (MHP) and matte relative to NPI. This conversion has pulled material out of the stainless-steel-oriented NPI supply chain and into the battery-oriented finished nickel supply chain.

A related metric Selby cites is the narrowing discount between NPI and LME (London Metal Exchange) nickel prices:

"We used to talk about the nickel pig iron discount to the metal price and it was around $250/mtu for a long time. And right now we're at $150/mtu. So it suggests again confirmation that the nickel pig iron market is very tight right now."

This condition Selby expects to be supportive of prices as the year progresses. He also notes a distinction between reported exchange and off-exchange stock levels in China which have risen since January versus declining stock levels in the rest of the world, a divergence he attributes partly to the mechanics of the NPI-to-matte conversion described above.

EV and Battery Demand Trends

On demand, Selby reiterated a long-standing view that nickel consumption tied to EVs and batteries has been understated in analyst forecasts. He notes historical demand growth of roughly 7% since 2019, compared to typical analyst projections closer to 2% for the current year. Citing recent data through May, he notes nickel demand linked to batteries is up 37% year-to-date, despite EV unit sales growth of only about 2%. He attributes this gap primarily to a 12% increase in average battery pack size, as the market mix shifts toward larger vehicles, including North American and luxury models, rather than smaller vehicles more common in China and Europe.

‍

Selby also addressed a question about AI-driven data center electricity demand and its potential effect on EV adoption, saying he does not see it as a major near-term concern for EV cost economics. He noted a more direct mining-sector impact: heavy electrical equipment such as transformers and switchgear has become the longest lead-time item for new projects, a bottleneck he expects to persist given competing demand from data center buildouts. He compared the current AI infrastructure cycle to historical boom-bust cycles in memory chip manufacturing, noting that increased profitability is likely to eventually attract new investment and capacity.

Corporate Developments

The RWE Memorandum of Understanding

Canada Nickel recently announced a memorandum of understanding with RWE, a major German utility active in renewable energy and carbon and energy trading. Selby described the arrangement as aligning around low-carbon steel inputs, specifically the nickel-chrome-magnetite product from Canada Nickel's Ontario project. He noted that Ontario's electricity grid, supported by hydroelectric and increasingly nuclear generation, provides a stable, low-carbon power source relevant to European steelmakers facing rising carbon costs. As he put it, the opportunity involves "exporting low-cost, low-carbon energy from Ontario into high-cost, high-carbon areas... like Europe." He indicated that further work is needed to define specifics such as customer relationships, logistics responsibilities, and financing arrangements before the MOU progresses to a definitive agreement.

Magna Mining and Sherritt International

Selby also commented on recent developments at two other nickel-exposed companies. Magna Mining received a $140 million investment from South American mining investor Alpayana, which Selby said positions the company to address its transition from cash-burning development activity toward cash flow generation. He characterised Magna today as "more of a high-grade copper story" with precious metals and PGM (Platinum Group Metals) exposure, rather than a primarily nickel-focused story.

Separately, Sherritt International continued to navigate operational disruption in Cuba tied to US executive orders, which had previously led the company to project running out of plant inventory by mid-June. Selby noted that associated governance disruptions, including resignations by auditors and officers, have since been addressed, with a Trump-linked private equity firm now involved. He expressed hope for a successful outcome given the underlying value of Sherritt's refining technology. The conversation closed with brief reference to Canadian-US trade dynamics under Prime Minister Carney's government, and Selby noted that Canada Nickel has similarly diversified its own commercial relationships, having recently signed an offtake and marketing agreement with a large European company rather than relying solely on the US market.

Key Takeaways

The discussion suggests that recent nickel price softness may reflect short-term market positioning tied to seasonal ore supply patterns rather than a fundamental shift in supply-demand balance, according to Selby's assessment. Supply chain indicators such as the NPI inventory drawdown and narrowing NPI discount point to underlying tightness not fully reflected in headline prices. On the demand side, EV-linked nickel consumption continues to outpace unit sales growth due to increasing battery pack sizes, a trend Selby expects to persist even amid volatile short-term data. For Canada Nickel specifically, the RWE MOU represents an early-stage but strategically aligned relationship targeting Europe's low-carbon steel market, while diversification away from reliance on the US market appears to be a broader theme among Canadian resource companies given current trade policy dynamics. Investors should note that much of this commentary reflects the perspective of a company executive with a direct financial interest in nickel price outcomes, and should weigh these views alongside independent market data.

TL;DR

Nickel prices have softened on US dollar strength and reported Indonesian quota expansions, which Selby attributes to short-term market pressure during peak seasonal ore supply rather than a fundamental shift. Supply chain indicators, including a narrowing NPI-to-LME price discount and inventory drawdowns, point to continued underlying tightness. EV battery demand growth continues to outpace unit sales growth due to larger battery pack sizes, while Canada Nickel's new MOU with RWE targets Europe's low-carbon steel market as a longer-term strategic driver.

FAQs (AI-Generated)