Nickel’s Long-Term Bull Cycle Gains Momentum Amid Supply Constraints

Key Concepts

• Resource Nationalism: The tendency of governments to assert control over natural resources to maximize domestic economic benefits, often through taxes, royalties, or supply management.
• Laterite Deposits: A type of soil and rock formation rich in iron and aluminum, which is the primary source of nickel in regions like Indonesia and the Philippines.
• Vertical Integration: A business strategy where a company owns its supply chain, from mining raw materials to processing them into finished products (e.g., Tsingshan).
• Deep-Sea Nodule Mining: The process of extracting mineral-rich nodules from the ocean floor; primarily composed of manganese, with secondary nickel content.
• Permitting: The multi-year regulatory process required for mining companies to receive legal authorization to begin operations.

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1. Market Overview and Price Trends

Nickel prices are currently oscillating within the $18,500 to $20,000 per ton range. Despite a recent dip to just under $19,000, the market is expected to breach the $20,000 threshold as supply from the Philippines faces seasonal declines in the fall. Mark Selby notes that the market is currently in a "skepticism phase," where investors are hesitant to trust the sustainability of recent price gains, though he argues the fundamental shift in value retention by producing nations is permanent.

2. Indonesia and the Philippines: Supply Management

A significant development is the increased coordination between Indonesia and the Philippines to manage nickel supply.

• Value Transfer: Indonesia’s recent regulatory changes have successfully shifted economic value from Chinese-controlled processing companies to local Indonesian miners, who are now receiving approximately 50% more per ton of ore than they were six months ago.
• Government Revenue: The Indonesian government has secured substantial increases in tax and royalty revenues. Selby argues that it is highly improbable for the government to backtrack on these policies, as doing so would mean sacrificing significant tax income and alienating domestic mining interests.
• Minimum Price Formula: Recent adjustments to the minimum price formula represent a compromise, but the long-term trend remains upward toward these price floors.

3. Global Supply Landscape and "Plan B" Strategies

Selby draws a parallel between the current nickel market and the historical evolution of the aluminum market:

• Historical Precedent: In the aluminum sector, China initially relied on low-grade domestic bauxite, then moved to Indonesian bauxite, and eventually tapped into massive resources in Guinea.
• The Nickel Challenge: Unlike bauxite, nickel lacks a "Plan B" of similar scale. Indonesia is described as the "Saudi Arabia of nickel." While minor deposits may be found in regions like Ivory Coast or Guatemala, they are insufficient to alter the global supply-demand imbalance.
• Resource Scarcity: No major nickel deposits of significant scale have been discovered since the 1980s, and the current market demand is ten times larger than it was at that time.

4. Investment and Corporate Strategy

• Capital Allocation: With approximately 200 gold-focused investment stories but only about half a dozen viable nickel stories, capital is expected to flow toward the few remaining nickel projects as investors seek exposure to the supply-demand delta.
• Project Development: Selby emphasizes that for public companies, the strategy is to "stay relevant" and move projects toward production. He highlights his own company’s progress, noting they have reached the final stages of a four-year permitting process, with a draft assessment report now in a 30-day public consultation phase.
• The "Gold" Lesson: Selby reflects on his 2016 strategy of pivoting to gold assets during a market bottom, noting that while it was a successful trade, the current environment for nickel is uniquely constrained by a lack of new discoveries and a dearth of new market entrants.

5. Industry Updates and Notable Developments

• Sherritt International: Facing challenges in Cuba due to U.S. executive orders, leading to the withdrawal of employees and potential supply chain disruptions for their Fort Saskatchewan refinery.
• Deep-Sea Mining: The Metals Company has reached a compliance milestone with NOAA (National Oceanic and Atmospheric Administration) and signed a deal with Allseas to begin mining 3 million tons of nodules per annum by 2027. Selby notes these nodules are primarily manganese-heavy, meaning they will impact the manganese market more significantly than the nickel market.
• Exploration: EV Nickel is showing promising drill results in Timmins (35m at 1% nickel), while Next Metals in Botswana is drilling at extreme depths (1,500–2,000m), which presents significant feasibility challenges.

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Synthesis

The nickel market is undergoing a structural transformation driven by resource nationalism in Indonesia and a severe lack of new, large-scale global discoveries. While market skepticism persists, the fundamental shift—where producing nations retain more value and Chinese processors are forced to adapt—appears durable. For investors and mining companies, the path forward involves navigating a difficult regulatory environment, securing permits, and positioning projects to fill the widening gap between surging demand and stagnant supply.