The growing popularity of electric vehicles (EVs) is pushing up demand for batteries that power these vehicles. The increasing demand for EV batteries is pushing up the demand for nickel, a lot of which is required in these batteries. This leads me to think about nickel stocks.
With electric car usage expected to rise, it perhaps makes sense to look at investment opportunities based on nickel. Elon Musk is reported to have expressed interest in giving out a long-term contract to a company that mines nickel, subject to certain requirements being fulfilled.
Can you buy stock in nickel?
The answer is that you can invest in several nickel stocks. There are two types of investments in nickel: direct and indirect. Nickel indirect investments would include companies that manufacture and process nickel, as well as companies that transport it. The most common is direct investment.
In addition to nickel stocks, investors can get exposure to the nickel sector in three ways: Exchange-Traded Products (ETPs), futures, and physical metal.
Investing in nickel is a gamble on the future prospects of the manufacturing and industrial sectors. Both of these industries use a lot of this base metal. Nickel investing and investing in other base metals such as zinc, iron, and uranium is different than investing in precious metals such as gold and silver. The economy drives the price of base metals, while precious metals move in opposite directions.
The EV boom drives nickel prices higher
Nickel in EV batteries enables delivery of a higher density of energy as well as greater storage capacity while keeping costs low. At this point, there is no viable alternative on the horizon, which is perhaps why Tesla is looking to stitch up long-term contracts for the supply of the material.
The EV market, which is the primary engine driving the growth of nickel consumption as well as its prices, is considered to be in its early stages of growth. That leaves a wide upside still to be covered which, potentially, provides nickel companies ample scope to keep growing over several years.
Plug-in EVs, which constituted 2.5% of all vehicle sales globally in 2019, was up at 4% in 2020. The trajectory is becoming clear. We are increasingly hearing of more and more legacy manufacturers either adding an EV variant or considering going completely EV.
Nickel producers are not complaining.
Nickel production: Who is the world’s largest producer of nickel?
The intergovernmental International Nickel Study Group has determined that Australia (mainly Western Australia) (19.5M metric tonnes), Brazil (10.5M metric tons), Russia (7.75 million tons), New Caledonia (6.65 million tons), Cuba (5.25 million tons), and Cuba (5.55 million tons) have the highest nickel ore and nonmetallic minerals. Nickel production decreased from 2000 to 2013 and then increased again from 2016 to 2017. It recovered from 2017 to 2018.
Producing nickel in a way that is both environmentally sensitive and ethical in nickel mines is challenging. Nickel price will only increase as the demand for electric vehicle batteries increase.
In deep seas in particular metallic mineral deposits are known that can amount to more than 290 million tonnes at approximately 170,000. These facilities can be easily accessed if deepwater mineral extraction technology develops. It is used in superalloy and specialty steels like turbine generators, generators, and wind turbine furnaces, as well as transmission cables on electric motors.
Top Nickel Stocks
Like Tesla, other EVs are also likely to require access to similar caches of nickel. Nickel mining stocks are in a happy place right now. There are probably other materials too that are likely to benefit from the rising EV graph, but let us focus on a few nickel-mining-related investment opportunities here:
Haynes International (NASDAQ: HAYN) – Our Top Pick
Haynes International,(NASDAQ: HAYN), is a company that manufactures and sells cobalt- and nickel-based alloys. These alloys are resistant to corrosion and can be used in gas turbines, industrial heating equipment, and jet engines among others. This firm ranks ninth in our top 10 list of the best nickel stocks to purchase now. Over the past year, investors have received 60% in dividends from the company’s shares. Haynes’ market capitalization is just below $500 million, and the company generated more than $380 million in revenue last year.
Haynes International is one of the most popular options when it comes to dividend payouts. The company declared a quarterly dividend at $0.22 per share on April 29. This is in line with previous years. The forward yield was higher than 3%.
BHP Group (NYSE: BHP)
BHP is a huge, diversified mining company with some exposure to nickel. It also has stable cash flows arising from other segments. Its size and diversified exposure perhaps provides an additional layer of safety to investors.
Over 75% of its nickel production is already going to EV battery makers. The company also believes that by 2050, half of the light vehicles globally could be run on electricity.
Australian Nickel West, a fully integrated mine-to-market operation, is the major nickel mining operation of BHP and is the focus of expansion at the moment. Nickel West already has over 3,500 employees and contractors.
Vale S.A. (NYSE: VALE)
Vale is another large, diversified company, like BHP, with a similarly diversified portfolio that also produces copper, coal, iron and manganese, and several other minerals. The various cash flow streams the company generates to provide a cushion against adverse events in any one business. This also acts as a shock absorber for investors.
Vale is the world’s largest nickel producer with operations spread around the world in Indonesia, Brazil, Canada, and New Caledonia. In addition, it has refineries, some owned and some as joint ventures, in Taiwan, Japan, China, South Korea, and the UK.
Its scale makes Vale one of the best nickel stocks to consider adding to your portfolio.
FPX Nickel (OTC: FPOCF)
FPX Nickel, a nickel company from Canada, has its flagship mining project in British Columbia. The Decker Nickel District of the company is estimated to possess more than 5.3 million pounds of recoverable nickel with an additional 1.5 million pounds of inferred volume.
Though considered to be a relatively junior member of the mining community, FPX is pushing forward in several directions in a bid to grow the business rapidly. The management team is vastly experienced, having worked, between them, in over 35 countries, with a wide range of experiences in the mining industry.
Talon Metals (OTC: TLOFF)
With their primary project located in Minnesota, supplying to the EV industry is a focus area for Talon Metals. In addition, it also produces cobalt and copper that are needed by the EV industry and are currently imported. It has a joint venture with Rio Tinto.
The Minnesota project, separated into the north and south projects, produces high-grade Tamarack nickel-copper-cobalt. Its focus is on operating in a socially and environmentally responsible manner while reducing production costs.
Canada Nickel Company (OTC: CNIKF)
Another junior mining operations company that looks set to gain from the EV boom, Canada Nickel fully owns the Ontario, Canada located Crawford Nickel-Cobalt project. It is a recent discovery as a mining asset, having been owned by a forest company till 2011. It is considered to be one of the ten largest nickel sulfide caches globally, with the measured estimate of nickel being 1.2 kilotons. That should give Canada Nickel a long run on the growth path.
Platinum Group Metals
There are several other metals to consider. The platinum group metals (PGMs), a family consisting of six elements with similar chemical and structural properties, are highly valued for their many industrial, medical, and electronics applications. These versatile metals are a key component of many products that we use every day. These include:
Platinum: Although platinum is most well-known for its use in jewelry making, its main purpose is to make catalytic converters and other industrial applications.
Palladium: Although it isn’t as well-known as platinum, palladium can also be used to make jewelry. Palladium’s unique property is its ability to absorb hydrogen. This makes it useful in chemical processes that involve hydrogen exchange between reactants.
Rhodium: Another highly-active catalyst is Rhodium. It is used extensively in vehicle emission control systems. Because of its high melting point, and temperature stability, Rhodium can also be used to make glass.
Iridium: Iridium, which is one of the rarest and corrosion-resistant PGMs, is extremely rare. It is extremely dense and has high thermal and chemical stability.
Ruthenium (Ru): Ruthenium, although brittle and a good alloying agent of platinum and palladium, is extremely hard.
Osmium (Os) – Osmium, the hardest and densest of the group is often mixed with other PGMs like platinum and iridium.
Nickel Investing Final Thoughts
Trading nickel may offer many benefits. One benefit is portfolio diversification. You can also diversify your portfolio by investing in base metals such as nickel. These metals have different properties and are more likely to move with the market than against it.
Nickel can also be used to hedge against weak dollars and inflation. It seems that nickel is in high demand because of China’s demand. Nickel is in high demand to be used in stainless steel. Nickel demand could explode as the electric vehicle industry grows and so does the need for more batteries. Nickel will see a rise in demand as a result.