The Future of Nickel: Indonesia's Strategic Role

• In 2025, Indonesia will likely flex its muscles as the dominant nickel producer to manage supply and push prices higher, targeting the $20,000-$21,000/tonne range.
• Despite some demand weakness in 2024 due to destocking and trade tensions, nickel demand grew 4%+ and is poised for 8-10% growth in 2025 driven by the EV battery market.
• Reported nickel surpluses of 600,000 tonnes over the past 3 years have not been reflected in inventory builds, suggesting persistent first-fill demand that analysts are missing.
• Few new large-scale nickel projects are viable below $20,000/tonne prices outside of Indonesia. Canada Nickel's Timmins district projects aim to be a key part of that non-Indonesian supply pipeline.
• Canada Nickel is derisking its flagship Crawford project, working towards permits and a financing package to enable a construction decision by late 2025. It is seeing increased partnership interest as the project's reality grows closer.

"2025 is year one of the ONEC era," declares Mark Selby, CEO of Canada Nickel, signaling a transformative year ahead for the nickel market. The nickel market is poised for an eventful year as Indonesia, now the dominant global supplier, looks set to actively manage supply to induce higher prices. For investors, the shifting fundamentals of the nickel space merit a closer look, especially in the context of the accelerating electric vehicle (EV) battery demand. Companies with advanced nickel projects in secure jurisdictions outside Indonesia are expected to generate a lot of buzz.

Indonesia's Nickel Dominance & Implications

‍Indonesia's nickel industry has grown dramatically over the past decade to the point that the country now controls around two-thirds of global supply. If you include Indonesia's nickel ore exports to China, the number is closer to three-quarters. This dominant position gives Indonesia the power to significantly influence the nickel market by flexing its muscles on supply.

The country has strong economic incentives to do so. Nickel and stainless steel exports have become a major contributor to Indonesia's trade balance, helping swing the current account from deficit to surplus in recent years - until nickel prices slid in the past 18 months and the current account flipped back into deficit. For a country of Indonesia's size, actively managing the supply of its resource endowments to achieve higher prices is a logical economic strategy.

Mark Selby, CEO of Canada Nickel, believes Indonesia will target a nickel price in the $20,000-$21,000 per tonne range. There are few new nickel projects globally that can deliver large-scale production at those prices, while a lot of the production curtailed over the past 18 months as prices declined would need prices above $22,000/tonne to restart. If Indonesia wants higher prices, it has the tools to achieve them by controlling supply. As Selby emphasizes:

"Indonesia on its own is is now much larger than OPEC was at its peak."

Nickel Demand Dynamics & the EV Factor

‍Despite some demand weakness in 2024 due to destocking effects and macroeconomic headwinds stemming from U.S.-China trade tensions, nickel demand still grew by over 4%. This is a better performance than most other base metals. Going into 2025, Selby sees nickel demand growing by 8-10%, and potentially up to 20-25% in the EV battery sector based on some analysts' projections.

The EV story is set to be a powerful driving force for nickel demand in the coming years. Passenger EV sales achieved a 25% increase in 2024. Importantly, securing critical mineral supply chains like nickel is becoming a national security priority for Western governments as they look to reduce dependence on China. This reshoring of supply chains back into Western economies will generate additional demand for nickel and other key minerals.

The Battery Show, with Mark Selby, CEO of Canada Nickel

The Nickel Supply Challenge 

‍On the supply side, there have been persistent analyst misperceptions about the market balance. Over the past three years, analysts have reported 600,000 tonnes of cumulative surplus. But during that time, visible inventories have increased by less than 100,000 tonnes. Even if you include potential invisible inventories, the number doesn't exceed 150,000 tonnes. On a multi-year basis, the reported surplus and actual inventory builds should be similar.

This discrepancy points to stronger than recognized first-fill or off-market demand on a continuous basis that is drawing down the apparent oversupply. Looking ahead, there are very few new nickel projects of scale being developed outside Indonesia.

A crucial shift is occurring in how Western nations view nickel supply.

"This is a national security issue, western governments want China out of the supply chain."

This stance has already manifested in restrictions on various minerals:

"We saw this past year's limits on China and... they're going to keep flexing that going forward."

Canada Nickel's Positioning

‍Canada Nickel's Timmins district projects aim to be a key part of the non-Indonesian nickel supply pipeline. Based on its latest drilling program, the company believes the Timmins region could host a nickel endowment larger than the world-class Sudbury basin. With its Crawford project, the company is working toward securing permits and a project financing package to reach a construction decision by late 2025.

As the project's development has advanced, Canada Nickel is seeing increased partnership interest from downstream stainless steel and alloy producers looking to secure supply outside of Indonesia. The growing reality of the project as permitting and engineering milestones are achieved is driving this heightened attention.

"We get into this nice self-reinforcing positive cycle going forward now. We spent the last year, and a lot of money, advancing permitting. We're down to the final stage in the federal process. We spent money on doing the front-end engineering design, so we have the engineering complete to be able to make long lead orders. And so what those industry partners do, the more you de-risk the story and the closer you get to a final investment decision, the more interested they get"

Investment Implications

‍For investors, the evolving nickel market dynamics create opportunities despite, or arguably because of, the dominant position of Indonesia. The growing concentration of supply in one country and its demonstrated ability and intent to manage that supply to target higher prices creates risks for the nickel-dependent downstream.

End-users will increasingly look to diversify their sourcing to reliable suppliers in safe jurisdictions. Companies that can provide that secure non-Indonesian supply should benefit from the robust demand growth driven by the EV battery sector and the gradual electrification of the transportation fleet.

The challenge is that there are very few nickel projects globally that can deliver large-scale production at incentive prices given current market conditions and mining economics. Companies with projects that have the scale and strategic positioning could be part of that solution set. 

The Investment Thesis for Nickel

• Nickel demand is poised for robust growth of 8-10% in 2025 and beyond, driven especially by rapidly expanding EV battery needs
• Indonesia, as the dominant supplier controlling 60-70% of the market, is likely to actively manage supply to target higher prices in the $20,000-$21,000/tonne range
• There are very few advanced, large-scale nickel projects outside Indonesia that can deliver material supply at those incentive price levels
• Western governments are increasingly focused on securing critical mineral supply chains outside of China for economic security reasons, which will drive additional demand
• Companies that can help meet that demand for secure, non-Indonesian nickel supply are well positioned to benefit from the constructive market dynamics and the heightened end-user focus on diversifying sourcing

The nickel market looks poised for a positive inflection driven by accelerating EV battery demand, Indonesia's growing supply-side sway and economic incentives to pursue higher prices, and the urgency major economies are placing on securing critical mineral supply chains. The scarcity of advanced, large-scale nickel projects in reliable jurisdictions outside Indonesia creates opportunities for companies that can fill that supply gap. As Selby concludes about the broader market dynamic:

"This is about certainty of supply and wanting to understand where the product can come from."

Canada Nickel's Crawford project and broader Timmins district endowment position it well to potentially be a meaningful part of that non-Indonesian supply solution over the coming decades. As the company delivers further project milestones, it should benefit from growing end-user partnership interest and capital flows seeking nickel exposure. Investors would be wise to watch the space closely.