Nickel: Jumping the gun - ANZ

Daniel Hynes, Senior Commodity Strategist at ANZ points out that Nickel prices have surged 23% over the past month, as investors homed in on the potential impact of the rising demand for electric vehicles (EV) and while they agree that the potential is significant, they suspect the market has jumped the gun and a short-term pullback could be in order.  

Key Quotes

“In saying that, it will just be a consolidation as the market is likely to remain tight even before the demand growth from the EV sector kicks in. As such, nickel prices will remain on an upward trajectory, but the path won’t always be smooth.”

“The impact on nickel demand from the EV sector could be substantial. The battery sector currently consumes only 6% of total nickel. Using some very general assumptions on battery size, battery life and type of vehicles, we could see demand for nickel from this sector increasing up to five times over current levels. This would take its market share to around 12% by 2025.”

“However, it’s all about supply. Lithium ion batteries require class I refined metal, as opposed to the ferronickel and NPI that has taken up the bulk of growth recently. That means prices may need to increase to as high as USD19,000/t to incentivise new supply. In the short term, though, the market is moving into a structural deficit, which will surely keep upward pressure on prices.”