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Forget about natural gas for the longer term commodities play – nickel could well be where the action is. The metal is already in demand as the globe continues its transition to alternative sources of energy.

This week nickel has been under a lot of scrutiny during LME Week in London. Jessica Fung of Pala Investment Management was on a panel that discussed nickel among other metals and said prospects for the metal were looking good thanks to demand from battery makers. These are estimated to make up 10% of the nickel market by 2025, potentially as much as 30% of 2030 if Fung is right.

Nickel market will need to see huge growth to meet demand

This means that the entire market for nickel will need to be 60% larger than it is today. if it is also going to meet demand from the industries that traditionally consume it, like stainless steel. Nickel looks like these new dynamics in the price will create a supercycle for the commodity. We could be looking at structurally much higher prices in the near future.

Supply will also be a big factor in the performance of nickel prices. Much will depend on the mining industry’s ability to bring more nickel projects online in the course of the next decade. Fung at Pala Investment Management said she thought there would be plenty more nickel mining projects coming online in Southeast Asia.

Manufacturers are already moving to secure their nickel supplies under contract ahead of higher prices. Tesla, for example, recently announced it would be purchasing 42,000 tonnes of nickel from Prony Resources‘ nickel operations in the French territory of New Caledonia in the South Pacific. Tesla had already been working with Prony as an adviser on product sustainability standards ahead of the deal.

Power crisis is creating short term price decline

Nickel still faces some short term risks however. Economic concerns and any disruption to stainless steel manufacturing could drive the price down temporarily. The power and real estate crisis in China at the moment seems to be impacting base metals prices. Power cuts have hit stainless steel mills in China, leading to lower mill production and lower manufacturing overall of durable goods. The agreement is expected to initially supply Tesla demands for its factories in Asia.

Nickel prices had been on a good run as the global economy started to reopen after pandemic-induced lockdowns. There had been indications of tightening in nickel and stainless steel inventories which had driven prices higher in early September. However, nickel prices slipped later in the month and ended September down 6% approx in London.

The ongoing real estate crisis in China, is also having a knock on effect on demand from the construction industry in the country. This is leading to short term declines in nickel, but given anticipated longer term demand, is creating a buying opportunity.

The Chinese energy crisis could be a factor for nickel and other base metals markets throughout the winter months. The industrial sector in China has already been scaling back since March 2021 when the government forced mills in Inner Mongolia to wind down production levels.

Here’s a sample of available Nickel ETFs

Product NameISINExchange TickerListing Currency
WisdomTree Nickel
Hargreaves Lansdown | Interactive Investor | AJ Bell Youinvest | Charles Stanley Direct | EQi
GB00B15KY211NICKUSD
WisdomTree Nickel – EUR Daily Hedged
EQi
JE00B6XL6W59ENIKEUR
WisdomTree Nickel 1x Daily Short
Hargreaves Lansdown | Interactive Investor | AJ Bell Youinvest | EQi
JE00B24DKJ77SNIKUSD
WisdomTree Nickel 2x Daily Leveraged
Hargreaves Lansdown | Interactive Investor | AJ Bell Youinvest | EQi
JE00BDD9QB77LNIKUSD
WisdomTree Nickel 3x Daily Leveraged
Hargreaves Lansdown | Interactive Investor | AJ Bell Youinvest | EQi
JE00BYQY5X153NILUSD
WisdomTree Nickel 3x Daily Short
Hargreaves Lansdown | Interactive Investor | AJ Bell Youinvest | EQi
JE00BYQY5Q483NISUSD

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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