Nickel Supply Constraints & Government Support Drive Optimism

Recording date: 4th September 2024

Nickel continuing back into range of $16-$16,500 per tonne after flirting with $17,000 per tonne last time we talked 2 weeks ago. Exchange inventories continue to tick up at 2-3kt per week and expect to see another 20-30kt of nickel delivered before market comes back to balance.

The “R” word is pummeling the equity markets, and it remains to be seen whether banks will cut interest rates quickly enough to prevent an economic slowdown. Given the macro overhang, nickel prices may have a further test of prior downside, but I think the downside is limited as it is still pushing deep into cost support. We’ll see prices rise to $20K by year-end as we should see a stronger fall market for the EV supply chain and stainless squeezed by ore supply tightness.

In the China/Indonesia markets, the main stories continue to be ore tightness, with ore prices for key grades increasing $1/tonne each week over the last 2 weeks. We are seeing some improvement in stainless and battery sulphate prices, but we are not seeing strong demand in either market. However, we see restocking in the battery sector as we head into the traditionally strong fall season. It will be interesting to see how ore imports from the Philippines have continued to trend and what happens when the Philippines’ rainy season comes into view later in the year.

INSG stats for 1st half 2024 – mine supply up 2.8%, refined output up 5.8%, demand up 7.5%. 1st half surplus of 35kt (70kt annualized-just over 2%). Please remember that at the start of the year this number a lot of analysts had 250kt+ forecasts for this year

Quiet few weeks on the news front as typical at the end of August in terms of company news, but some important news:

Canada Nickel published the first of seven additional resources from its Deloro project, which it expects to publish by mid-next year, and is going to give an update on the regional exploration program.

It was good to see news from FPX that the Province of British Columbia has identified the Baptiste nickel project as a project to be included in the province's newly established Critical Minerals Office concierge service initiative, a foundational strategy action to enable the prioritization of critical mineral projects in B.C.

I think you’ll see more initiatives like this in more countries. Jurisdictions tried to have wide-open processes but realised that to prioritize limited resources. It is best to focus on a smaller set of priority projects.

The big news was about price support from the U.S. government for critical minerals.

An official from the Energy Department told the publication that the new policy would involve setting a price floor and agreeing to pay the difference when market prices fall below that threshold for critical minerals produced in the US.

More importantly, it would lessen America’s reliance on China, which dominates the global supply chain for critical minerals. “If we move forward on anything like this, the intent would be to give the nudge needed to set off the flywheel, versus create a permanent subsidy or cushion for a particular sector or company going forward,” the Energy Department official told POLITICO.

Other big news underscoring the strategic importance of domestic supply chains was antimony.

US Geological Survey data showed that China, the world's largest producer of antimony, a strategic metal used in flame retardants, batteries, munitions, and photovoltaic equipment, accounted for 48% of global antimony mine production last year.

The limits, effective from September 15, apply to six kinds of antimony-related products including antimony ore, antimony metals and antimony oxide, the ministry said in a statement.

The US government had provided a substantial funding package to Perpetua Resources who is building a gold-antimony mine.

—

Learn more: https://cruxinvestor.com/categories/c...

Sign up for Crux Investor: https://cruxinvestor.com