Here is some free advice worth a nickel.
The lustrous transition metal is on track to post its best quarterly performance in a decade. As media headlines swirl around the emerging demand for electric vehicles (EVs), many wonder if this clamour can keep the market’s trend climbing.
It’s a supply story that traders are watching closely for how it is performing versus the other metals in this space, which currently appears to be seeing under-investment, according to analysts.
One key facet to this jump for the resource comes from the world’s largest nickel exporter - Indonesia - and it’s year-end ban on exports of raw ore.
As Bloomberg reported in late September 2019, investors expect this move to tighten supply.
But once this ban is in place, experts predict that consumers will be using lithium-ion batteries in greater number for handheld devices and EVs.
The electrification of transport is going to be a big driver for nickel but with a supply shortage looming, battery technology would need to be developed, tested, commercialized, manufactured and integrated into EVs faster than ever before. This comes via an article written for Forbes magazine by Gavin Montgomery, Wood Mackenzie Research Director of Battery Raw Materials.
In addition to simultaneously streamlining and beefing up their supply chains at an unprecedented rate, he admitted it would be: “Impossible for many EV targets and ICE (internal combustion engine) bans to be achieved – posing issues for current EV adoption rate projections.”
Consumer demand will still be high, increasing nickel’s value. In breaking down the numbers of what the future driver of the nickel market will be in terms of EV sales, he also explained that total passenger EV car sales, including hybrid electric vehicles (HEV), were up by over 24% last year. Global electric car sales (with a plug) will account for 7% of all passenger car sales by 2025, 14% by 2030 and 38% by 2040.
There could be some good news buried here. Earlier in the summer, Montgomery also said that the low price of increasingly important electric vehicle battery material nickel could wind up being a handicap rather than a boost to EV adoption. According to WoodMac’s Global battery raw materials long-term outlook H1 2019 report, nickel’s price has had a lid kept on it thanks to this relative abundance of the material used in stainless steel production and it has stifled investment in expanding production. Demand will obviously rise as EV adoption takes off, coupled with an artificial export blockade from Indonesia.
Montgomery advised investors to make a move in the market sooner than later - “Investment in nickel production needs to happen now.”