Fitch Raises Forecast for Future Pricing Levels for Nickel

Fitch Solutions recently upgraded its long-term price outlook for nickel to $16,500 from $15,750 per ton. This comes as the price of the metal continues rising, given the international market deficit.

Despite this, nickel prices on the London Metals Exchange are expected to decrease in the coming months as the production of the metal increases and the demand from steel production is stabilized.

Fitch also reported that prices had recovered from a price correction that took place in March after Tsingshan, a producer of stainless steel in China, announced that it planned to considerably increase its production for nickel for 2022 and 2023. Last month, prices also dropped to a four-week low, prompted by a warning issued by Chinese regulators to domestic commodity companies to keep the market fair, which came after base metals underwent a strong rally.

Prior to the announcement by Tsingshan, the price of nickel had reached record highs, driven by bullish expectations about future supply deficits of the metal, a weakening dollar and increased optimism in the market. Despite these declines in price in the aforementioned months, the metal has averaged about $17,000 per ton in the year to date, which is what prompted the bullish price forecast by Fitch.

However, the analyst cautions that growing nickel supply in the global market as 2021 progresses will be the main driver of the metal’s near- to mid-term outlook from present levels.

The production of nickel in Indonesia is also expected to experience a more than 30% year-on-year growth this year, as nickel inventories in China begin to demonstrate signs of increasing and domestic mining activities recover following the conclusion of the Philippines rainy season. Additionally, the report notes that high frequency indicators may be suggesting rather slow demand from the stainless-steel sector in China later in the year.

The electric car market will also help drive demand higher, as the use of nickel in Li-ion battery compositions also grows. However, a shortage of battery-grade nickel may prompt auto-manufacturers to use lithium-iron-phosphate batteries for mass market cars, which presents a drawback risk to the demand for nickel for Li-ion batteries.

Earlier in February, Tesla CEO Elon Musk stated that nickel was the company’s largest inhibitor to successfully increasing its production of lithium-ion cells, which prompted the company to shift to the use of LFP cathodes in its standard range cars. However, the company does intend to use cobalt-free high-nickel cathodes for its semi-truck and cybertruck vehicles. This is in addition to continuing to source raw materials from the New Caledonia Goro nickel mine.

Mineral extraction companies like Excellon Resources Inc. (TSX: EXN) (NYSE American: EXN) (FSE: E4X2) are likely to reap the benefits triggered by the heightened interest in metals which can be used to make electric vehicle batteries, as well as ride on the uptrend in metals’ prices in general.

NOTE TO INVESTORS: The latest news and updates relating to Excellon Resources Inc. (TSX: EXN) (NYSE American: EXN) (FSE: E4X2) are available in the company’s newsroom at  https://ibn.fm/EXN

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