Nickel Bulls Charge Ahead - Demand Surge Driving Automakers to Lock Up Supply

Recording date: 7th November 2023Nickel prices trading this AM at $17,600 ($8.00) after trading back up to $18,000 at start of the week. Got a little boost as a few thousand tonnes came off LME inventories taking them back to where we were at the start of October. Expect nickel prices to bounce off the bottom here for the next little while until we underlying growth in both EV and stainless comes through and we get past battery chain destocking from lower lithium prices (will get into some of the details later in the discussion today).“Great convergence” still underway – sulphate prices trading flat to nickel prices, NPI discounts continue to contract by another several per cent, and MHP now trading at 78-80% of LME price (about halfway back to the low 90s% level 18 months ago). One analyst reported seeing more contracts now incorporating processing fees (25,000 RMB / $3,400 per tonne) rather than %.Bulls emboldened to push back as more stories about ore quotas and ore imports from the Philippines. Indonesia set to unveil new pricing mechanisms at the end of the month – stay tuned. Indonesia has more control over the nickel market than OPEC did at its peak – no 4X increase in price, but will do what it takes to maximize value from a finite resource base.China’s Stainless Steel Council has released the country’s output figures for the first nine months of this year. Crude stainless steel output over this period was 26.6Mt, up 11.8% on a y/y basis, while that of nickel-intensive 300-series was up 14% y/y at 13.6Mt. Combining production and trade, China’s stainless steel apparent consumption rose 9.2% y/y to 22.3Mt during the first nine months. Will see production rates drop off a little bit during the last few months as Chinese seasonal demand is not as strong as anticipated – but strong demand given all of the economic headwinds we’ve had over the last 12 months.EV sales – will have more next week for September – but China is up 22% y-o-y.  People seeing a few models not selling well and extrapolating across the market – will be interesting to see what totals look like for the US. Will have more on this next week.Rumours of possible limited FT agreement with Indonesia. Letter from bipartisan.Not a concern – we need some amount of Indo nickel into US/Europe – no real new Western supply- effectively zero in next 2-3 years. Western car companies (particularly the higher end of the market, not going to depend on high carbon, environmentally damaging nickel from Indonesia. Canada Nickel Crawford project is the only large sulphide project that can come online by the end of 2027. We need more than half a million tonnes for US/Europe. We need EVERY big project in Canada to come to market – current across-board weakness is not reflected in physical discussions. The urgency of automakers and battery supply chain has taken a massive step change in the past 6 months – we are formally starting our process for Crawford in early December once FS report is filed end of month and expect it is going to be a very fun, profitable process for our shareholders. Glencore announced that Nickel Rim South (core mine in Sudbury) going on care & maintenance next April. Will be replaced by Onaping Deep mine which is ramping up in Sudbury. Keeping on C&M to be able to access Vale’s Victor deposit (which is larger than the original Nickel Rim Deposit) – is a shame for Sudbury & Canada that this hasn’t happened yet (was a key part of synergies in the 2005 Inco-Falco merger).Magna Mining released more drill results from 4 holes from its Crean Hill project – the best intercept (into crown pillar) was 96m of 0.75% Nickel, 1.29% Copper, and 2 g/t PM.Learn more: https://cruxinvestor.com/commodities/nickelSign up for Crux Investor: https://cruxinvestor.com