As the world moves closer to a more sustainable future, the demand for nickel is soaring. Nickel’s unique properties such as strength, ductility, and resistance to heat and corrosion make it essential across various industries, particularly in the production of stainless steel. However, its most significant role lies in the composition of lithium-ion batteries used in electric vehicles (EVs). Recognizing its importance in the clean energy transition and industrial applications, nickel was included in the U.S. government’s critical minerals list in 2022. This list, established under the Energy Act of 2020, identifies critical minerals as those vital to the economic or national security of the United States, with a supply chain susceptible to disruption, and serving an essential function in manufacturing products crucial for the country’s economic or national security.
In simpler terms, critical minerals are those that the U.S. cannot function without or relies heavily on potentially adversarial foreign nations for. It’s not just the U.S.; numerous other countries, including Canada, the EU, South Korea, and Japan, have their own critical minerals lists, all featuring nickel. Despite a brief price surge in early 2022 following the Russian invasion of Ukraine, which raised concerns about potential supply disruptions, nickel prices have largely remained stable over the past decade, typically fluctuating between $10,000 to $20,000. While nickel is vital for achieving a net-zero future, an ample surplus of mine supply coupled with a global downturn in steel demand has counteracted the robust growth of the EV market, leading to the current weak pricing environment for nickel. Nevertheless, the outlook for nickel in the near term may not be strong, but the green transition is anticipated to widen the gap between supply and demand.
The International Energy Agency (IEA) has projected that at the current pace of development, nickel demand will surpass supply by approximately 25% in 2030, indicating a more optimistic long-term outlook for nickel prices. Meanwhile, let’s delve into the top three nickel stocks primed to benefit from this escalating demand, focusing on their production capacities, market positions, and forward-looking strategies.
1. **Vale S.A. (NYSE: VALE)** Market Cap: US$48 Billion Vale, the world’s second-largest nickel producer in 2023, boasts operations in Brazil, Canada, Indonesia, and New Caledonia. Notably, the company’s Long Harbour nickel processing plant in Canada has set a standard for low-carbon nickel production, emitting approximately a third of the industry’s average CO2 levels. In the previous year, Vale produced 164,900 tonnes of nickel, a decrease of 8% from the year before but in line with projections due to ongoing development at some of its mines. With its scale and commitment to sustainability, Vale is well-positioned to meet the increasing demand, particularly from the EV battery sector. Vale’s strategy to expand nickel output while adhering to environmental standards makes it an attractive choice for investors focusing on sustainable growth. However, one drawback is that Vale is a diversified miner also involved in iron ore and copper production, with nickel accounting for only 8.8% of the company’s operating revenue in 2023. Nonetheless, this diversification reduces investment risk, making Vale a conservative option for those seeking exposure to the nickel market’s growth.
2. **Glencore plc (LON: GLEN | OTC: GLNCY)** Market Cap: US$70 Billion Glencore, the world’s third-largest nickel producer, is a UK-based diversified miner operating across various markets. In the previous year, Glencore produced 97,600 tonnes of nickel, representing a modest 4.2% of its total revenue for 2023. What sets Glencore apart from Vale is its significant diversification, with an energy segment alongside its metals and minerals division. The company’s broad scope and size make it a relatively secure investment, with a strong performance since the market lows post-COVID. Glencore has garnered praise for its ambitious emissions reduction targets, aiming for a 25% cut in Scope 1, 2, and 3 emissions by the end of 2030 and a 50% reduction by 2035 compared to a 2019 baseline. Many major companies have yet to report Scope 3 emissions, let alone set near-term reduction targets, placing Glencore ahead in climate action planning. Furthermore, Glencore’s primary listing on the London Stock Exchange facilitates European investors seeking exposure to nickel, with additional listings on the U.S. OTC market.
3. **Canada Nickel Company (TSXV: CNC | OTC: CNIKF)** Market Cap: US$160 Million Canada Nickel is a junior nickel miner based in Canada, offering aggressive investors seeking direct exposure to the growing nickel market an intriguing opportunity. While sourcing nickel from Canada may not seem remarkable, it’s worth noting that the U.S. imports over 40% of its nickel from its northern neighbor, making Canada an appealing jurisdiction for nickel producers due to its proximity to a significant buying market. The company has consolidated nickel projects in the historically prolific Timmins mining camp in Ontario, a renowned gold mining district globally. Canada Nickel presents an enticing proposition for investors looking to capitalize on the nickel market’s expansion compared to the diversified miners mentioned earlier.
