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Nickel was one of the few bright spots today as it jumped another 17 cents a pound to close at $6.35.  For the past week it has traded above key resistance at $6, and it’ll be interesting to see if that level establishes itself as new support with prices at a nearly 3-year high.

One thing is certain, though – Nickel is in the grips of a powerful bull market and significantly higher prices can be expected in 2018 and beyond, based on an array of technical and fundamental factors (in years in which Nickel runs, so does the Venture!).

Fundamental Drivers

A combination of the most robust global economic growth in years, surging China imports, tighter supplies and fund interest are all in Nickel’s favor at the moment, not to mention a projected 9% demand increase from the steel industry (the top user).  Glencore commented recently that it’s seeing the best market conditions for the metal in at least a decade, and electric cars are barely playing a part yet.  

The battery sector overlays on a really positive market outlook for Nickel, and it’s forecast to be transformational from 2020 onwards.  That should help offset one of the key threats to rising prices which is higher production from Indonesia and the Philippines after a move by the top producers to pull back on restrictions targeting their mining sectors.  In the meantime, thanks to aging mines, years of depressed prices and a lack of new discoveries, high-grade global Nickel reserves have flattened out and are expected to go into decline just as Nickel’s battery demand kicks into high gear.

Nickel will be in another significant deficit in 2018, very possibly 100,000 tonnes or more, and the shortfall is likely to be particularly acute in China which accounts for about half of global consumption estimated at around 2.1 million tonnes.  A much publicized environmental crackdown there has shut capacity.  As a result, the Chinese are ramping up imports as evidenced by the latest data that showed China’s Nickel imports more than doubled in December from a year earlier to 41,315 tonnes.

Contributing to this week’s strength in Nickel has been First Quantum Minerals (FM, TSX) which said its Nickel output dropped 24% last year to 17,837 tonnes.  First Quantum, one of the world’s leading Copper producers, added Nickel to its menu with the start of operations in late 2011 at the open-pit Ravensthorpe laterite operation in Western Australia.  However, the mine has been shut since last September due to low prices. 

(To digress slightly, it’s hard to imagine First Quantum not wanting to remain in the Nickel business but the risk of low-grade laterite deposits – not suitable for the battery industry – may have them thinking in a different way.  The only problem, of course, is that high-grade Nickel opportunities are rare.  That may explain why company geologists were seen “drooling”, for lack of a better word, over drill core from Nickel Mountain at the recent Roundup Core Shack, and having discussions with geologists from Garibaldi Resources (GGI, TSX-V).  It wouldn’t be a stretch to say that First Quantum, known to make bold moves on occasion, is one of the early potential candidates to grab a stake in Garibaldi, particularly if the next drill hole at Nickel Mountain hits another wide intercept of Nickel-Copper-rich massive sulphides on a step-out from hole 14 into one of the two newly-defined “super” conductors.  Dr. Peter Lightfoot, who essentially wrote the book on Nickel sulphide deposits, has described the Nickel mineralization in massive sulphides at Nickel Mountain as the best he’s ever seen, and the combination of very high grade and apparent unusual purity would make this material ideal for the battery sector).

In case you missed this, Visual Capitalist put out an excellent piece on Nickel late last year – check it out by clicking on the link below:

Nickel:  The Secret Driver Of The Battery Revolution

Big-Time Technical Breakout!

iPath Bloomberg Nickel Subindex Total Return ETN (JJN, NYSE)

Below is an excellent chart that shows what’s happening in terms of the “Big Picture” in Nickel.

The iPath Bloomberg Nickel Subindex Total Return ETN, which trades on the NYSE under the symbol JJN, reflects the returns that are potentially available through an unleveraged investment in Nickel futures contracts.  JJN offers pure play exposure to the metal and will generally, though not precisely, move in lockstep with Nickel prices as its underlying assets are Nickel futures and not physical metal (liquidity in this instrument, though, is an issue for most investors given the low average daily volume of about 25,000 shares).

There’s no question that Nickel has entered a bullish new cycle after plunging into very oversold conditions, the most extreme since the financial crisis, at the end of 2015 and the beginning of 2016:

Key “takeaways” from this 11-year monthly chart which has proven to be very accurate in tracking Nickel’s moves since 2016:

• RSI(14) has momentum (59%) and is now attempting to conquer its long-term downtrend line;
• Important recent breakout level was Fib. resistance near $15 (new support which equates to about $5.50 – $5.60 Nickel);
• Next key breakout area is between the long-term price downtrend line near $17.50 and Fib. resistance at $17.90 (closed at $17.10 today);
  
• ADX indicator has plenty of room for the bullish trend to strengthen;
• It’s reasonable to suggest the JJN could take a run this year to measured Fib. resistance at $23, a 35% jump from current levels which implies a Nickel price of about $8.50.

The Next Canadian High-Grade Nickel Discovery!

Apart from the Nickel Mountain-Kirkham Corridor in the heart of the Eskay Camp, the next best near-term opportunity for a new Nickel sulphide discovery in Canada is in the under-explored Rainy River region of northwest Ontario where Dr. Lightfoot has noticed some remarkable similarities with the Eskay Rift.  Crystal Lake Mining (CLM, TSX-V) is in the driver’s seat with a large land position that includes an historic deposit drilled half a century ago with massive sulphides outcropping at surface (sound familiar?).  We’ve been researching this area for months, and there’s powerful evidence of a district-scale opportunity as CLM prepares to fly a VTEM survey in advance of drilling.  More tomorrow.

Note:  John, Jon and Daniel hold share positions in GGI.  Jon also holds a share position in CLM.