BHP Labels Nickel as 1 of its 3 Future Commodities

Canada Nickel Co Inc.
  • TSX-V: CNC
  • Shares Outstanding: 68M
  • Share price C$1.66 (11.09.2020)
  • Market Cap: C$113M

Stay ahead with our weekly Nickel Market Insights with Mark Selby, Nickel Market Commentator and CEO of Canada Nickel Company (CNC).

Let’s get straight into it. What is the major nickel news this week? There has been a major price move, with nickel now trading at $15,000/t ($6.75/lbs) and this momentum is continuing to grow. Iron ore prices are up to a 6.5-year high, copper price have broke through the $3/lb barrier. The growth of these industrial metals has been greatly aided by the Chinese reflation package, a typical Chinese go-to strategy for much of the last 30 years, which aims to kickstart the Chinese economy post-COVID lockdown with investment in industry and infrastructure.

Though the pace of the reflation trade has slowed somewhat because of poor weather, multiple commodities setting new multi-year highs cements a sense of bullishness. In fact, China has reflated so ferociously that year-on-year (YoY) numbers actually look strong, despite months of COVID-induced stagnancy. As the hub of stainless steel growth and nickel supply/demand, alongside Indonesia, China is a great indicator for global nickel performance, and with a continued rate of c. 17% growth YoY, and stainless steel prices going up more than 10% in a week, things look like they are only going to go north from here.

On the fundamentals side of things, nickel looks strong too. With ore prices, MDI prices and stainless steel prices going up, it finally looks like the stars might be aligning for a meaningful nickel bull run.

Another big piece of news that has created excitement within the nickel and EV investment community emanated from a BHP report. As one of the world’s leading resource companies, BHP probably knows what it is talking about, and it has labelled nickel as one of its 3 future commodities, the other 2 being potash and copper. This is quite ironic considering BHP has spent 7 years of the last decade trying to sell its nickel business! Even the doubters are becoming believers. This is a full 180° flip, and if a major player like BHP has done it, nickel and EV investors can expect to see many more follow suit. RioTinto, Anglo American and Glencore are all names that Selby touted. If big takeout are going to take place, these are the players with the cash necessary to make things happen.

Over on the macro/geopolitical front, investors are beginning to appreciate the scale of the EV opportunity, especially in China. Companies like Ideanomics, who we interviewed recently, are looking to take advantage of the huge opportunity that presents itself to provide electrical power to the vast fleets of new electric Chinese vehicles. As the transition from fossil fuels to electricity accelerates, so will the development of new charging infrastructure. In fact, the number of public charging stations for EVs in China surged 50.5% in May. This is only the beginning.

The growth of the EV thematic has continued to drive battery demands up, despite short-term consumer capital difficulties caused by COVID-19. Investors who bought good battery metal stocks in recent months will have made more money than those with money in most gold companies. This is a rare occurrence and is especially remarkable given the huge run that gold has been going on, breaking through the $2,000/oz barrier at one point.

Elon Musk’s quarterly conference call attracted much interest from the investment community. He appealed to nickel producers to make as much clean, efficient and sustainable nickel as possible for use in Tesla batteries. However, a recent Bloomberg article questioned this strategy, claiming that ‘Elon Musk Is Going to Have a Hard Time Finding Clean Nickel.’ Selby thinks Bloomberg did a great job with this article and so do we. It is a very comprehensive look at the logistics behind these “giant contracts” that are being offered to clean miners and the disparity this has with the mining industry’s messy track record. The CEO of CleanTeQ, which is developing an Australian mine to supply nickel for vehicle batteries, pointed out the folly of the current EV supply chain. Whilst no gas is being using to fuel the vehicles during daily operations, gas was certainly used in their production, because ‘Nickel projects being built in Southeast Asia will rely on coal, fuel oil or diesel to run their operations and will leave a very large carbon footprint.’ The industry needs a top-to-bottom transformation; that doesn’t happen overnight.

Moreover, recent high profile accidents, such as a diesel spill in Arctic Russia and a burst waste pipeline in Papua New Guinea, suggest the industry with struggle to reform and fulfil Musk’s appeal for a large quantity of “efficient” and “environmentally sensitive” nickel. What do you think?

What did you make of Mark Selby and his nickel investment coverage this week? Comment below and we will respond. You can listen to his weekly commentary on nickel investing at cruxinvestor.com/club

Company Website: https://canadanickel.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

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