Why Indonesia's Supply Strategy Could Send Nickel Prices Soaring in 2025

• Expect nickel prices to reach $20,000/ton by end of February 2025 due to supply constraints from Indonesia and seasonal production declines in the Philippines
• Indonesia, as the "OPEC of nickel", has incentives to keep prices high as nickel is a major export; it will likely maintain or reduce supply in 2025
• Global nickel mine supply has been shrinking for 5 consecutive months; meaningful supply growth is unlikely in 2025 without a major price spike
• Electric vehicle sales, which drive battery demand for nickel, are still growing at a healthy clip globally despite some regional slowdowns
• Canada Nickel Company had several positive developments in 2024 including a $20M investment from First Nations groups and key permitting milestones

As investors look ahead to opportunities in 2025, one commodity that warrants close attention is nickel. Used primarily in stainless steel production and increasingly in batteries for electric vehicles, nickel plays a critical role in the global economy. In a recent interview, nickel industry expert Mark Selby laid out a compelling case for why nickel prices are poised to surge in the coming months, creating attractive prospects for investors.

The Bullish Outlook for Nickel Prices 

Selby, who has a track record of prescient nickel forecasts, believes the stars are aligning for nickel prices to jump to $20,000 per ton by the end of February 2025. While prices slid from a previous high of $21,000 hit in May 2024 to around $15,000 currently, Selby sees this as a temporary pullback. He attributes the recent softness to destocking and caution among Asian buyers nervous about the impact of Trump tariffs on Chinese growth. But looking ahead, Selby is confident the market will tighten and send prices sharply higher.

Indonesia's Nickel Dominance 

A major driver of Selby's bullish outlook is Indonesia's increasing control over global nickel supply. He dubs Indonesia the "OPEC of nickel," noting that the Southeast Asian nation is on track to account for two-thirds of world supply by the end of 2024.

What's more, nickel is one of Indonesia's biggest exports, giving the government strong incentive to keep prices elevated. Selby explains:

Indonesia is now the OPEC of nickel... It is very much in Indonesia's interest to see nickel prices closer to 20 than to 15 and also drive up the ore price within the country, which benefits Indonesian miners disproportionately as opposed to Chinese processing companies.

Indonesia has demonstrated its market power by limiting nickel ore exports in recent years. The latest data shows Indonesian supply staying flat or potentially declining in 2025. Selby sees this "final phase of the fight between China and Indonesia" which will end with Indonesia as the victor in controlling the nickel market.

Constrained Supply Growth 

Beyond Indonesia's export limitations, nickel supply growth looks constrained globally heading into 2025. Selby points out that nickel mine supply has declined for five consecutive months, with demand also pulling back but the market still in surplus. While analysts forecast supply to grow next year, Selby is skeptical.

It'll be very tough to see meaningful supply growth next year unless prices spike and Indonesia says 'okay prices are getting too high' and starts to loosen up supply at that point in time.

Several nickel mines shut down in 2024, and the full-year impact of those closures will be felt in 2025. Without substantially higher prices to incentivize new production, a balanced market or even undersupplied conditions are plausible scenarios.

Interview with Mark Selby

The Philippines' Seasonal Slump 

Exacerbating the tight supply picture is the typical first-quarter decline in nickel ore shipments from the Philippines due to the rainy season. Selby notes Philippine supply can fall by half during the annual monsoons. Given the amount of Philippine ore that was "sucked out" into Indonesia in 2024, this seasonal slump is likely to be more impactful in draining global inventories and putting upward pressure on prices in early 2025. Similar scenarios in previous years saw nickel prices spike above $20,000 in May.

Electric Vehicles Still Charging Ahead 

While stainless steel production remains the primary demand driver for nickel, accounting for around 70% of usage, the rapidly expanding electric vehicle (EV) sector is an increasingly important source of consumption. EV-related demand for nickel is concentrated in the NCM cathodes used in lithium-ion batteries.

Despite concerns about slowing EV sales, the segment is still growing at an impressive pace according to Selby. While Chinese EV sales lead the way with 40% growth in 2024, Europe and North America saw healthy expansion of 25% and 10% respectively. Even with a slight decline in Europe, overall global EV sales increased by 25%.

Importantly, NCM batteries are taking share, which bodes well for nickel demand. One major auto market seeing nickel-driven battery sales is Europe. With EVs accounting for an ever-rising portion of nickel demand, this is an important factor to watch for the market.

Canadian Nickel Developments 

As a final note, Selby highlights some promising developments for Canada Nickel Company, which is advancing its Crawford nickel sulfide project in Ontario. The company recently secured a $20 million investment from a coalition of First Nations groups, an encouraging sign of indigenous support.

Canada Nickel also cleared a key regulatory hurdle by submitting its environmental impact statement, starting the clock on a 1-year timeline to receive permits. Additionally, regional drilling hit a new discovery at the company's Mann South target, which Selby believes "has the scale potential of Crawford going forward."

With nickel prices ending 2024 on a soft note, some investors may overlook the compelling setup for a significant rally in the coming months. However, a close examination of supply and demand fundamentals points to a tightening market in early 2025.

Indonesia's control over supply, steady demand from steel mills and EV battery makers, and the potential for an undersupplied market create a convincing case for higher nickel prices ahead. As Mark Selby's analysis demonstrates, it would be wise to take a serious look at nickel prospects in the new year.