To 2021/2 levels? Highly unlikely.

Ratings agency Fitch estimates nickel prices will be at US$20,000/t. This would be an improvement, but well below pre-COVID levels. The supply glut and weak demand for China is expected to continue to be a laggard on nickel stocks.

This is not the first battery metals bust cycle to hit nickel stocks and other battery metal stocks and won’t be the last. But for now, we think investors should avoid nickel stocks given all the risks and uncertainties facing it. Yes, they say that without risk there is no reward, but it is difficult to see any upside in the short to medium term.

12 months ago, the benchmark price for nickel on the London Metals Exchange (LME) was US$30,000 pet tonne. Now it is barely above US$16,000 per tonne. There is a general oversupply of nickel in the world as EV sales are weaker than expected. Also hurting matters was rapid growth from nickel producers in Indonesia, many of which are backed by Beijing. Indonesia has more than half the world’s production and it could have 66% by 2032 if forecasts from Benchmark Minerals turn out right.

This has hit many nickel stocks on the ASX. Amongst them:

• IGO (ASX:IGO) told investors it may have to write of all $1.3bn it paid for Western Areas just 18 months ago
• Panoramic Resources sank into administration just prior to Christmas. Granted, nickel prices were only part of them problem, with bad machinery and bad weather also hurting the company. In a double blow for IGO, it held 13.7% of the failed company and had tenements surrounding it. Hey, at least its $312m bid in 2019 wasn’t successful.
• Mincor Resources was acquired for $760m by Andrew Forrest’s private nickel explorer Wyloo Metals. Although it suffered a blow in the form of BHP refusing to take ore because it had too much arsenic.
• Perenti (ASX:PRN), which had 160 workers on Mincor’s Savannah project, now faces the decision of what to do with these workers.
• Nickel Industries (ASX:NIC) hasn’t fared that bad with a 44% share price plunge in 12 months. At the same time, it has warned that over 1,000 jobs are in the balance. One grace is that it counts Glencore as a Western customer and is due to start supplying nickel matte to it this month.

That’s just the producers. If you thought they had it bad, spare a thought for explorers trying to drum up investor attention amidst safer alternatives like gold stocks.