Base metals, particularly nickel, play a crucial role in the modern economy, supporting sustained economic growth. Nickel's unique properties, such as high resistance to heat and corrosion, make it indispensable in various applications. Two key trends driving increased nickel demand are energy storage and electric vehicles (EVs), a trend that is expected to continue in the coming years.
Approximately two-thirds of nickel usage is found in stainless steel products, ranging from household items to large-scale industrial manufacturing components like jet engines. Nickel's high resistance to corrosion and heat contributes to its versatility across different manufacturing sectors.
As global requirements for electricity rise, nickel's importance in batteries and energy storage becomes more significant. For instance, lithium-ion batteries increasingly incorporate more nickel to enhance energy density, thereby extending the drivable range of EVs. This development is particularly relevant in car-dependent regions such as North America, highlighting nickel's role in the transition from gas-powered cars to electric vehicles.
The 2024 International Energy Agency (IEA) Global EV Outlook reports that the shift to clean energy systems will drive a substantial increase in metal requirements, positioning the energy sector as a major stakeholder in metal procurement. To meet the Paris Agreement goals, the IEA forecasts a 60-70% rise in nickel demand over the next two decades. Understanding the sources of nickel supply becomes crucial in this context.
Currently, Indonesia leads global nickel production, accounting for approximately 50% of the world's supply. Other countries, including the Philippines, Russia, New Caledonia, and Australia, also contribute to nickel production, but Indonesia's large mineral reserves secure its dominant market share. Geopolitically, China has been strengthening ties with Indonesia to secure a foothold in the critical minerals market, indicating the strategic importance of nickel.
Beyond the EV sector, the development of data centers and artificial intelligence (AI) is also driving nickel demand. AI requires extensive data centers with sophisticated servers that consume large amounts of energy. During periods of limited energy availability, such as reliance on solar power or infrastructure issues, battery backups become essential. Innovations in battery design, particularly nickel-zinc battery chemistry, offer high energy efficacy and denser batteries, which are advantageous for space-constrained AI data centers and high-temperature operations.
In response to the rising demand for nickel, the Sprott Nickel Miners ETF Fund (NASDAQ: NIKL) aims to capitalize on this trend. The fund offers potential value in three areas: commodity exposure, thematic and growth investment, and global equity energy allocation. Investors could consider this ETF to enhance their commodity portfolio, focus on growth sectors, or diversify their energy exposure, given nickel's critical role in EV batteries and energy storage.
Sprott's recent special report, "The Case for Investing in Nickel Miners," argues that as electric vehicles and energy storage technologies become integral to the global economy, companies involved in battery materials will represent significant economic value and wealth-building opportunities for investors.
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