Who Should Invest in Nickel Stocks?
Investing in nickel stocks presents an exciting opportunity, particularly for those with a keen interest in the commodities market or those seeking diversification in their portfolio. Here's who should consider investing in nickel stocks:
Long-term investors who believe in the growth story of electric vehicles and green energy should consider nickel stocks.
Prices can fluctuate based on factors such as global supply and demand dynamics. Risk-tolerant investors may find investing in nickel stocks a rewarding venture.
Value investors seeking undervalued may find nickel stocks appealing. Due to the cyclical nature of nickel mines, some nickel stocks could be trading below their intrinsic value
Environmental, Social, and Governance (ESG) investors might find nickel stocks appealing. As the world transitions to cleaner energy, the demand for nickel in electric vehicle batteries, is expected to rise
Thematic investors who focus on trends like the rise of renewable energy, and electric vehicles might find nickel stocks an attractive proposition. As these trends grow, the demand for nickel will likely soar.
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Nickel Prices and their Volatility
For several years, there was a surge in nickel prices, primarily been fueled by the rising demand in the battery sector. Lithium-ion batteries, critical in the production of electric vehicles, have been a major factor in the rising nickel price. The robust demand for lithium ion batteries is set to increase as the EV market continues to grow. This, in turn, was projected to boost nickel prices further, creating a favourable environment for nickel producers. Or so it was thought.
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.
Will Nickel Prices Recover?
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.
3 Best ASX Nickel Stocks to Buy Now in 2024
Nickel Mines (ASX: NIC)
Nickel Mines is one of the world's top 10 nickel producers, having produced 131,126t in CY23 from its mines in Indonesia. It made a US$176.2m profit after tax.
IGO (ASX: IGO)
IGO is a diversified nickel and lithium producer. It has three nickel projects in WA: Cosmos, Nova -Bollinger and Forrestania. In FY23, $1.02bn in revenue and a $549m NPAT (up 66%). However, its share price has suffered as the price of nickel has slumped as investors fear a hit to its FY24 financials.
Blackstone Minerals (ASX: BSX)
Blackstone Minerals, is a small cap stock with a 90% interest in the Ta Khoa Nickel project in the Son La Province of Vietnam. It has an existing modern nickel processing facility and there is an underground bulk sample program to deliver nickel.
3 Best ASX Nickel Stocks to Buy Now in 2024
FAQs on Investing in Nickel Stocks
Nickel Mines, Poseidon Nickel, and Blackstone Minerals are currently leading the ASX nickel market, with promising projects and solid growth potential.
Our Analysis on ASX Nickel Stocks
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