Nickel Is Set To Play An Important Role In Developing Industries

Higher prices for nickel will be generated through new industrial growth.

Matthew Averay
Jul 28 · 4 min read

The market for nickel is pivotal as it forms the basis for a number of interesting and evolving industries. Nickel plays an important part in the production of both stainless steel and electric vehicles which ensures that the demand for the metal will remain strong and holds the potential for growth. As one of the world’s leading producers of nickel is Indonesia which is of particular interest to the Enegra Group. An intelligent approach to engagement with the nickel market should derive profits as the markets for nickel-based products continue to grow.

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Nickel’s price continues to remain strong during 2020 and is currently around $13,500 against a backdrop of falling warehouse stocks. However, this is far from the record high of around $50,000 nickel achieved back in 2007. Nickel is the fifth most abundant element on earth and some of the biggest producers of nickel beyond Indonesia are the Philippines, Canada, Russia, Australia, Brazil and New Caledonia. Interestingly nickel is spread throughout the universe and meteorites landing on earth contain far greater quantities of nickel than most earth rocks.

As part of its development plans, Indonesia intends to increase capacity throughout its downstream mining industry. To achieve this goal Indonesia has enacted a ban on the export of nickel ore and is currently trying to enforce the ban by sanctioning businesses which fail to comply. A recent refusal to compromise on the export ban is driving Indonesia to cut export quotas or terminate permits for companies circumventing the regulations. The current issues surrounding Indonesia’s ore export ban appear to be directly tied to the fixed prices for nickel stipulated by the government and discrepancies against international market pricing. Economic factors dictate that nickel miners will look for the best prices for their ore on the global market but the government is trying to change that through the new regulations.

Nickel is an important element in the production of stainless steel and other alloys. Production of stainless steel is predicted to increase significantly over the next decade, partly due to increased demand within China. The inclusion of nickel strengthens alloys allowing them to withstand extreme temperatures and corrosion. Because of this two-thirds of current nickel mined today is used in the production of stainless steel. However, the multi-billion dollar market for nickel is set to grow in step with the growth of the market for electric vehicles. This expanding market will have significant impacts on the nickel industry and market prices over the next decade.

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The electric vehicle industry relies heavily on nickel for the production of Lithium-Ion batteries. These batteries were the product of a development cycle which lead through nickel-cadmium and then nickel-metal hydride batteries. Nickel’s major advantage in battery production is that it helps deliver higher energy density and increased energy storage capacity at reduced costs. This ultimately improves the cost of producing the storage for each kWh of energy. One primary advantage of this is in improving power storage from the production of intermittent renewable energy sources like solar and wind.

As a producer of nickel with a large population, Indonesia has plans to develop a robust internal market for electric vehicles. This is in line with the desire to develop the downstream mining industry throughout the country. In the near future, Indonesia has the capacity to become a major production hub for electric vehicles and plans to become a global player in their manufacture. The growth of this industry should precipitate significant structural changes in the global nickel market. Investment in the nickel industry should provide investors with access to both the growing stainless steel and electric vehicles markets. Several commentators believe that the sector is currently undercapitalised which presents opportunities for growth, investment and profit.

The ability to identify changing market forces and trends across the sector is a major advantage to companies intending to benefit from nickel. With our strong ties to Indonesia, the Enegra Group is well-positioned to take advantage of these trends and it is our belief that there is a profitable future for those willing to invest in nickel and its associated industries. As fossil fuels begin to diminish the need for nickel will only increase. There will be significant rewards for companies who intelligently position themselves within the market for nickel. Investment into nickel today is an investment into the future.

Enegra Group Ltd (LL15959) is a commodity trading company focused on resources in Southeast Asia. Equity in Enegra has been tokenised via the EGX security token. For enquires related to the purchase of EGX please contact support@enegragroup.com.

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