Base metals, particularly nickel, are essential to our modern economy and are critical to supporting sustained economic growth. Nickel’s versatility is evident in numerous use cases, but two key trends – energy storage and electrical vehicles – have driven increased nickel demand in recent years and are projected to continue doing so in the future.
Nickel plays an important role in our modern economy due to its high resistance to heat and corrosion and its ease of cleaning. Approximately two-thirds of nickel’s usage is in stainless steel items, ranging from pots and pans to large-scale industrial manufacturing items like jet engines. Its high resistance to corrosion and heat makes nickel versatile across different manufacturing use cases.
As the world moves to meet growing global electricity requirements, the significance of nickel in batteries and energy storage is increasing. For instance, lithium-ion batteries use more nickel to increase the drivable range by enhancing energy density. This is particularly crucial in car-dependent regions like North America, where nickel will likely become an important part of the transition from gas-powered cars to electric vehicles.
According to the 2024 International Energy Agency (IEA) Global EV Outlook, the shift to a clean energy system is set to drive a significant increase in metal requirements, making the energy sector a major stakeholder in procurement. In scenarios that meet the Paris Agreement goals, the IEA forecasts a 60-70% increase in nickel demand over the next two decades.
Currently, Indonesia is the primary region for nickel mining, accounting for approximately 50% of global production. Other countries like the Philippines, Russia, New Caledonia, and Australia also contribute, but Indonesia’s mineral reserves give it a significant market share. Geopolitically, China has been strengthening ties with Indonesia to corner various aspects of the critical minerals market, spurring investment in Indonesia’s nickel industry.
The growth of the EV sector is expected to be a strong driver for nickel demand. Additionally, the development of data centers and AI is proving to be another catalyst. AI requires vast data centers with sophisticated servers that consume large amounts of energy. Nickel-zinc battery chemistry is demonstrating high energy efficacy, resulting in denser batteries that take up less space and operate at higher temperatures, which is crucial for AI data centers.
As the world meets rising electricity requirements, the Sprott Nickel Miners ETF Fund (NASDAQ: NIKL) aims to capitalize on the growing demand for nickel. This ETF offers potential value as commodity exposure, a thematic or growth investment, and a global equity energy allocation. Given that non-U.S. countries hold the largest nickel reserves, investors looking to diversify their energy exposure could consider this fund.
Sprott’s recent special report, "The Case for Investing in Nickel Miners," argues that as electric vehicles and energy storage technologies become mainstays in the global economy, companies reflecting the value of battery materials will represent real economic value and be a source of wealth-building for investors.
Photo by Kumpan Electric on Unsplash.
