Why Nickel Remains a Strategic Investment Despite Global Trade Tensions

• Despite recent price volatility due to tariff wars, nickel's fundamentals remain strong with prices approaching the "grand convergence" point
• Indonesia's dominance in production and environmental concerns create supply constraints that support long-term price stability
• Government funding for critical minerals is accelerating, with nickel projects receiving priority status in multiple jurisdictions
• Companies with production flexibility outside the US market stand to benefit from trade redirection and domestic support policies
• New discoveries and project developments face complex challenges, creating barriers to entry that support existing producers

Economic Impact of Tariffs & Trade Wars

The global metals complex has been significantly disrupted by recent tariff announcements, with nickel prices retreating to 2020 levels at approximately $14,000 per ton or 650 cents per pound. This represents a 15% decline from recent highs, though nickel has shown greater resilience than other base metals such as copper, which has suffered losses exceeding 20%.

As Mark Selby observes in the discussion, "Trump's done a great job basically wiping out the entire base metal complex, including nickel. So in the last few days here, we've taken prices all the way back to 2020 levels." This price volatility reflects immediate market uncertainty rather than fundamental weakness in nickel's supply-demand dynamics.

The implementation of wide-ranging tariffs has created confusion throughout supply chains that have developed over decades. Without clear policy objectives, companies struggle to adapt effectively. As Selby notes:

"No one can solve something when you don't know what you're trying to solve... these are supply chains that have been in place for 20, 30, 40, 50 years."

However, this disruption presents strategic opportunities for those positioned correctly in the market. Companies that can redirect production to markets outside the United States face less exposure to tariff impacts. For development-stage projects, governmental support is likely to increase as nations prioritize domestic supply chains for critical minerals.

The Battery Show, with Mark Selby

Nickel Market Dynamics & Price Trends

The nickel market has been moving toward what industry experts call the "grand convergence," where various production methods approach cost parity. While recent price declines were not the anticipated pathway to this equilibrium, current market conditions may have accelerated this process. As Selby explains:

"I've talked a lot about this grand convergence, about this last two or three years. So unfortunately, I didn't think this was exactly the way we're going to sort of finally get there, but I think we may be there."

This convergence is evident in the narrowing discount between nickel pig iron (NPI) and stainless steel prices, which has compressed from 250-300 RMB per ton to potentially reaching parity. Long-term expectations suggest stabilization around 100-150 RMB, representing a new market equilibrium.

Current nickel prices have fallen well into the cost curve, suggesting limited additional downside potential. This cost-driven floor provides relative protection compared to other metals. Furthermore, Indonesia, as the dominant global producer, maintains an interest in supporting higher prices through strategic management of ore availability within its domestic market.

Seasonal factors add complexity to the supply picture. The Philippines' rainy season, which restricts mining output by approximately 50%, creates cyclical tightness in ore supply. As this season concludes, increased supply would typically exert downward pressure on prices. However, recent price behavior suggests structural supply constraints may outweigh seasonal factors, with Philippine ore prices actually increasing as March ended.

Indonesia has also experienced an unusually intense rainy season, with reports of flooding around major production centers like Marowali. Environmental concerns continue to shadow Indonesian production, with recent media investigations highlighting "blood nickel" issues related to environmental degradation and labor conditions.

Political Landscape & Its Influence on Markets

The uncertain political environment creates both risks and opportunities for the nickel market. Near-term volatility may persist until clearer policy directions emerge, which could happen through bilateral agreements with key trading partners like Japan or South Korea.

Economic performance will ultimately influence policy sustainability. As Selby points out, if "Trump's numbers will collapse because he's not doing anything that he said he would actually do in terms of bringing down prices and improving the economy," political calculations may shift. He adds that "one of the few things you can count on is US politicians' self-interest" to preserve their electoral prospects.

Powerful economic interests are already mobilizing against restrictive trade policies. "The Cook brothers who bankroll a lot of the MAGA politicians have actually launched a lawsuit via one group," Selby notes, indicating potential fractures in support for continued tariffs. These actions by "the guys who really control the purse strings of the political machine in the United States" could accelerate policy adjustments.

For investors, the challenge lies in navigating this uncertainty while positioning for eventual policy clarity. Companies with production flexibility across different markets hold advantages during this period. As Selby confirms, "all of this Trump stuff is net-net... long-term helpful for us" in terms of accelerating government funding and support for critical mineral projects outside the US market.

Company Updates & Industry Developments

Recent developments across the nickel sector demonstrate both progress and challenges in bringing new supply to market. FPX Nickel has published a comprehensive scoping study showing attractive economics for their process to convert high-grade ultramafic concentrate into nickel sulfate. The ultramafic deposits, similar to Canada Nickel's Crawford project, produce clean, high-grade concentrates that simplify the refining process.

In Australia, Western Mine's Mulga Tank discovery has established a significant resource of nearly 2 billion tons at 0.27% nickel, placing it "in the top bucket of new discoveries" according to Selby. This development, while in a remote location, represents one of the few major new nickel discoveries globally.

Lifezone's Kabanga project in Tanzania, described as the "highest grade nickel sulfide resource that hasn't been developed," is advancing toward a feasibility study expected by mid-2025. Notably, the project has been simplified by postponing plans for a hydrometallurgical refinery and doubling the mine size. This follows a pattern seen in other projects like Chalice Mining's Gonneville in Australia, recognizing that "hydromet for complex nickel concentrates is very, very difficult."

This trend of simplifying development plans reflects practical challenges in the sector. Vale's Voisey's Bay, built on "the highest grade complex concentrate that's around," still required a $5 billion investment in processing facilities with uncertain operating economics. These barriers to bringing new supply online support price stability for existing producers.

Government Funding & Its Implications

Government support for critical minerals development has intensified, creating significant opportunities for strategically positioned projects. The trade tensions have accelerated this trend, with Selby noting that:

"This Trump nonsense basically just reinforces that stack [of government funding] is going to show up much more vigorously and much more quickly than it had before."

Political support is becoming increasingly explicit, with government officials publicly advocating for specific projects. Selby mentions that:

"One tweet from the current National Resources Minister talking about our project [Crawford] and why it should be funded" demonstrates this priority shift.

Similarly, opposition parties have identified key projects for expedited development, creating a supportive environment regardless of election outcomes.

The scale of government funding available is substantial, as evidenced by the $145 million granted to Revex Technologies for processing mine tailings and recycling initiatives. While this represents a significant capital allocation for relatively modest nickel recovery potential, it indicates the strategic premium governments are willing to pay for domestic supply chain development.

Investors should recognize that this funding environment creates asymmetric opportunities, with certain projects receiving disproportionate support based on strategic considerations rather than purely economic metrics. As Selby observes:

"In this critical minerals race, it'd be nice if capital was allocated most effectively. Governments don't always do that."

Recycling & Resource Management Challenges

The recycling segment of the nickel market presents complex economics that investors should understand. While politically attractive and environmentally beneficial, recycling operations face challenging economics when built as standalone facilities rather than additions to existing infrastructure.

Selby explains this dynamic clearly:

"Recycling is a great business if you have a 50-year-old processing plant that's already paid for, and you're just looking for marginal feed to add into your feed stream." However, "to invest new capital to primarily recycle material is not great because you are competing against plans that have unused marginal capacity."

This creates a competitive disadvantage for new recycling ventures compared to established producers with underutilized capacity. The Revex Technologies project, despite substantial government funding, will process tailings containing only "25 to 30,000 tons of nickel" from the Eagle mine, a relatively modest resource base for the capital deployed.

These economics suggest that while recycling will play an increasing role in the nickel supply chain, primary production will remain essential to meeting demand growth. Investors should prioritize companies that can efficiently produce new material while potentially incorporating recycling as a complementary activity rather than their core business.

Investment Thesis for Nickel

• Supply Constraints Persist: Despite price volatility, fundamental supply limitations remain in place due to environmental concerns in Indonesia, seasonal disruptions in the Philippines, and the limited pipeline of new high-quality projects
• Government Support Accelerating: Critical mineral strategies are driving unprecedented funding support for nickel projects, creating favorable economics for developers independent of market prices
• Strategic Flexibility Premium: Companies with the ability to sell into multiple markets hold significant advantages in navigating trade disruptions and can potentially benefit from redirected supply chains
• Processing Bottlenecks: The demonstrated challenges in developing cost-effective processing facilities create barriers to entry that benefit established producers and those with simpler metallurgical profiles
• Convergence Creates Stability: The "grand convergence" of production costs across different technologies should establish a more stable long-term price floor, reducing volatility once current trade tensions normalize

The nickel market is navigating a complex landscape of trade tensions, environmental concerns, and shifting government priorities. While near-term volatility persists, the fundamental supply-demand dynamics remain supportive of stable to higher prices once policy clarity emerges. As Mark Selby succinctly observes:

"This is some short-term pain, but this is, again, perversely super helpful for any of us in the critical mineral space who can sell our stuff anywhere in the world outside the United States."

Investors with the patience to withstand current market turbulence may find significant opportunities in companies with advanced nickel projects, particularly those receiving strategic government support. The technical challenges in bringing new supply online, combined with growing demand from energy transition applications, create a compelling long-term investment case despite today's uncertainties. As global supply chains adapt to new trade realities, nickel's strategic importance only continues to grow.