Nickel Market Rebounds in 2024 Amid Surging EV Demand

Nickel market rebounds in 2024 driven by growing electric vehicle demand, despite Indonesia's surge in nickel supply. Contrarian investors see long-term investment opportunities in nickel miners as EV penetration increases.

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Bijay Laxmi
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Nickel Market Rebounds in 2024 Amid Surging EV Demand

Nickel Market Rebounds in 2024 Amid Surging EV Demand

The nickel market is experiencing a resurgence in 2024, fueled by the increasing demand from the rapidly growing electric vehicle (EV) industry. Despite Indonesia's surge in nickel supply, which now accounts for around 50% of global production with the potential to rise to 70%, the market remains bullish on the long-term fundamentals of nickel.

Why this matters: The growth of the nickel market has significant implications for the global transition to electric vehicles, which is critical for reducing greenhouse gas emissions and mitigating climate change. As the demand for nickel continues to rise, it will have a ripple effect on the entire supply chain, influencing the development of clean energy technologies and the future of theauto industry.

Nickel prices took a hit in 2023 due to softer Chinese EV sales and increased supply from Indonesia. However, the market has been rebounding in 2024 as EV production growth continues to drive demand. According to BloombergNEF, nickel surpluses are expected until the late 2020s, but patient investors could present compelling investment opportunity from a sharp rise in demand as EV penetration increases.

Contrarian investors like Sprott's Steve Schoffstall see strong long-term fundamentals and potential investment opportunities in the nickel market. "In our view, nickel miners are poised to offer investment attractive opportunities to investors," Schoffstall stated. He added, "Nickel will see increasing demand from lithium-ion batteries used in EVs, but also from other clean energy technologies... Around one-third of class 1 nickel demand is coming from EV batteries currently, rising to over 50% by 2027."

The global auto industry is undergoing a significant transformation, with governments offering massive subsidies to speed up the shift to electric vehicles. Chinese automakers have taken the lead in the EV market, accounting for about half of all EVs sold globally. China's dominance in the EV supply chain, particularly in batteries, has given it a significant cost advantage over Western automakers.

While the growth in demand for EVs has slowed globally, nickel demand is expected to remain strong due to its use in EV batteries. Chinese brands account for about half of all EVs sold globally, and fully electric vehicles accounted for a quarter of all new passenger car sales in China in 2023. China's global market share is expected to almost double to 33% by 2030, while traditional Western carmakers will see their share fall to 58% from 81%.

The nickel market has seen some turbulence, with the latest bear signal being the shuttering of First Quantum and Posco's Ravensthorpe Nickel Mine. However, the Indonesian orebody and plant backlog is clearing, with increased corporate and government interest in supporting new nickel operations. Australia's Federal Government has given major project status to Alliance Nickel's NiWest project, which has the backing of US Euro automaker Stellantis and Korea's Samsung. Japan's Sumitomo and Mitsubishi have also committed to undertaking a $98.5m DFS on the long-stalled Kalgoorlie Nickel Project.

Despite the optimism surrounding the nickel market, some analysts remain cautious. Macquarie analysts express skepticism about long-term demand bull scenarios, saying higher prices tend to lead to rebalancing from market participants. ANZ's commodity strategists Daniel Hynes and Soni Kumari believe that global growth indicators are not supporting current base metal prices, with inventories not as tight as prices would suggest. As the nickel market continues to evolve in 2024, investors will be closely watching the interplay between supply and demand dynamics, particularly in the context of the rapidly growing EV industry.

Key Takeaways

  • Nickel market rebounds in 2024 driven by EV demand growth.
  • Indonesia accounts for 50% of global nickel production, potentially rising to 70%.
  • Nickel demand to remain strong, driven by EV battery usage, despite global sales slowdown.
  • Contrarian investors see long-term opportunities in nickel market due to increasing EV penetration.
  • Global auto industry transforming, with China leading the EV market and Western automakers falling behind.