Securing Nickel Supply for the EV Revolution

• Korean battery manufacturers highlight a concerning shortage of nickel to meet demand.
• The price of nickel has remained in the range of $20,000 to $22,000 since early June, but there's a potential for a break below $20,000 in the coming weeks.
• Stainless steel production, which relies on nickel, has seen significant growth. Chinese stainless production rose by 40% YoY in August and is expected to rise by 20% YoY in September.
• Due to increased demand, North America will need more nickel than its current total consumption by 2030.
• Automakers and battery manufacturers are actively looking to secure nickel resources, realizing the growing demand in the coming years.

Securing Nickel Supply for the EV Revolution

Nickel Market Dynamics

The nickel market continues to see strength and tightness, with prices ranging between $20,000-22,000 per tonne over the past few months. There are early signs of restocking in the stainless steel supply chain, with stainless production in China up 40% year-over-year in August. This bodes well for nickel demand, as stainless steel remains the largest end use for the metal today.

Meanwhile, illegal nickel mine closures in Indonesia have impacted supply, causing NPI plants to import ore from the Philippines. This indicates stockpiles may not be as abundant as bears suggest. Overall, analysts believe nickel demand is set to surge over the next decade, especially from the EV and battery sectors. By 2030, forecasts for EV adoption have increased from 30% to 50% globally. This represents a massive jump in nickel requirements.

Automakers Seeking to Lock in Future Supply

According to Mark Selby, Chairman and CEO of Canada Nickel Company, automakers and battery manufacturers are urgently looking to lock in nickel supply contracts directly with producers. This marks a shift from the attitude a few years ago when car companies expected large discounts and for miners to be excited simply for the branding opportunity.

Now, there is recognition that new nickel projects will not get built without auto companies providing capital to support development. Selby says CNC could currently sell its Crawford project nickel multiple times over given high demand. He expects the wave of offtake agreements to accelerate over the next 12 months as players move from talk to action.

Major Supply Deficit on the Horizon

To illustrate the coming supply squeeze, one battery materials company indicated to CNC that by 2030, they will need more nickel than the entire current consumption of North America - which is around 150,000 tonnes. Yet this is just one player. With multiple companies in each part of the supply chain, experts estimate North America's nickel demand will quadruple to 400-450,000 tonnes within a decade.

Simply put, a massive deficit is looming unless new mines are built. For context, current global nickel production is around 2.5 million tonnes. The projects required to fill this gap will take years to develop. Selby believes that unless major mining companies start investing in new projects quickly, their market share will erode as private equity and energy companies enter the space.

Carbon Border Adjustment Mechanism

The Nickel Institute recently provided an update on the European Union's Carbon Border Adjustment Mechanism (CBAM) and its implications. Beginning in 2026, the CBAM will require importers of carbon intensive products like nickel and stainless steel to purchase carbon credits to account for their emissions. This will help level the playing field between low carbon domestic production and high carbon imports.

According to Mark Selby, the CBAM is a concrete development that will impact 15-20% of global nickel output. By placing a tax on high carbon feed, it will establish a clear price premium for low carbon nickel units. For Canada Nickel's Crawford project, which touts a very low carbon footprint, the CBAM provides a structural competitive advantage in serving European demand.

While the EU's version focuses on imports, similar border adjustment policies are expected to emerge in other regions. This trend will be positive for nickel developers offering verifiably green supply chains. More broadly, the industry still needs regulatory clarity around defining terms like "net zero" when it comes to nickel production. But the CBAM represents an important step in incentivizing reduced carbon intensity.

Canadian Projects Attractive But Scarce

Canada hosts numerous emerging nickel projects to help feed this demand, including CNC's Crawford. However, Selby stresses that nickel resources outside Indonesia remain scarce. Canada's total current consumption is quite modest at just 140-150,000 tonnes. Therefore, the country's development-stage projects will not be sufficient on their own, highlighting the need for diverse sources globally.

One peer project demonstrating strong economics is FPX Nickel's Baptiste deposit in British Columbia. Its recent PFS showed a post-tax NPV of $2.2 billion with an IRR of 18.6% based on $8.75/lb nickel. This establishes a benchmark for the potential value creation possible from large-scale Canadian nickel assets. Notably, government tax credits provided a few hundred million in additional value.

Conclusion

With nickel in strong deficit over the next decade, now is an opportune time for investors to gain exposure to the electric vehicle thematic. As auto companies urgently seek to lock in nickel supply, producers and developers with world-class assets stand to benefit tremendously. Canada Nickel Company's Crawford project could become a vital source of low-carbon nickel units with significant production scale. The company estimates it could ultimately supply 20% of North America's nickel needs alone. Between the EV and stainless steel sectors, Crawford is positioned as a generational asset that could deliver substantial value for shareholders in the years ahead.

About Canada Nickel

Canada Nickel Company Inc. (CNC) is a Canadian mining company focused on advancing the next generation of nickel-sulphide projects to deliver the metals needed for the electric vehicle (EV) revolution. The company’s flagship asset is the 100% owned Crawford Nickel-Cobalt Sulphide project in Timmins, Ontario. Crawford is a large scale, low cost nickel sulphide project with industryleading ESG credentials that CNC believes will be a leader among the next generation of nickel sulphide projects globally. With over 1.4 billion tonnes of resources, Crawford is one of the largest undeveloped nickel sulphide resources globally. The project benefits from excellent infrastructure and is located just north of Glencore's Kidd Creek Mine and Mill complex.