What are ASX nickel stocks?
ASX nickel stocks are mining companies involved in the production of nickel. They include mining giants like BHP Group Ltd (ASX: BHP), which owns and operates multiple nickel mines around the world. Or they can be small-cap companies like Poseidon Nickel (ASX: POS), which have nickel projects still in the development stage.
Nickel is one of the planet's most abundant and commonly used metals. Historically, nickel has been used in physical currencies. Even today, all Australian coins (including our 'gold' coins) are still made of alloys containing nickel.
Because it is strong, durable, and highly resistant to corrosion, about 70% of the world's nickel is used to produce stainless steel.
But nickel's use in emerging technologies – particularly battery technology – has some investors very excited about its future prospects.
Why invest in ASX nickel shares?
Like lithium and graphite, nickel is one of the most critical raw materials used to build lithium-ion batteries that power electric vehicles (EVs). Nickel – along with cobalt and manganese – is used as the cathode in batteries and helps increase a battery's useful life and energy density.
As the world transitions from fossil fuels (like oil) to more sustainable and environmentally friendly energy sources, the mass adoption of EVs is expected to accelerate. This will increase demand for the raw materials used to build lithium-ion batteries.
But it's not just EVs that use lithium-ion batteries. Popular technological devices like smartphones, tablets, and laptops also all use lithium batteries, meaning they all need nickel.
These trends could see demand for nickel surge over the coming years. If demand outstrips supply, this should push the price higher – potentially resulting in greater profits for nickel producers.
Top nickel shares on the ASX
(Ranked by market capitalisation from highest to lowest.)
|BHP Group Ltd |
|Diversified global mining giant involved in nickel production.|
|IGO Limited |
|Mid-tier mining and exploration company focussed on supplying the |
materials critical to the clean energy transition.
|Nickel Industries Ltd |
|Vertically integrated nickel stock with multiple operations in Indonesia.|
Just about any list of ASX mining and metals companies is going to be topped by BHP. It is the largest company listed on the ASX by market capitalisation and has diversified mining operations spanning the globe.
BHP's nickel mines are in the Northern Goldfields, near the town of Kalgoorlie in Western Australia. The nickel sulphide ore that BHP produces is smelted and refined in WA. It is then being transported to the Port of Fremantle, where it is exported to overseas markets. BHP sells more than 85% of its nickel to the EV battery industry.
BHP recently boosted its nickel portfolio when it acquired mid-tier mining company OZ Minerals for $9.6 billion in May 2023. OZ Minerals owned the nickel project in West Musgrave, WA, which is highly prospective for both nickel and copper. Once operational, it is expected to have a production life of about 26 years.
This miner is a good choice for investors seeking exposure to the metals and mining sector but who also want to support the green energy transition.
IGO is a mining and exploration company focused on exploring, developing and operating mining projects that produce the materials used in clean energy systems. It currently owns and operates a diversified portfolio of mining projects, including a lithium joint venture.
The company boosted its nickel assets when it acquired small-cap nickel miner Western Areas for $1.3 billion in 2022. Western Areas owned two nickel projects in Western Australia. They include the Forrestania operation, which the company claims is one of the highest-grade nickel mines in the world.
A vertically integrated nickel company, Nickel Industries has interests in multiple nickel mines in Indonesia, including the Hengjaya mine. Over the past decade, many new nickel operations have been launched in Indonesia, which is now the world's largest nickel producer.
Nickel Industries produces low-cost nickel pig iron, used to make stainless steel. It's essential to keep this in mind if you're considering investing in Nickel Industries, as it means the company doesn't tap into the EV transition.
Nickel Industries frequently collaborates with leading Chinese nickel and stainless steel producer Tsingshan Holding Group, which is particularly active in Indonesia.
Pros and cons of investing in ASX nickel shares
Some of the benefits include:
Nickel is a widely used industrial metal: Nickel possesses many properties that make it particularly useful in industry and manufacturing. Notably, its resistance to corrosion means it is a key component in stainless steel production. Historically, this constant level of demand has kept nickel prices relatively stable over time, reducing its risk.
The global transition to renewables could spur increased demand: The main reason to invest in nickel is to tap into the renewables theme. As the globe transitions away from fossil fuels, demand for EVs and other more environmentally friendly technologies will increase. This should drive up demand for nickel because of its use in rechargeable lithium-ion batteries.
And the cons…
The market has been turbulent recently: Despite its long and stable history, even nickel isn't immune to geopolitics. The massive price fluctuations witnessed in 2022 have shown that the nickel market can still be risky. Global conflicts and trade embargoes can upset the price of nickel. You should always consider the current environment before deciding to invest.
It is one of the most abundant metals on the planet: Although demand for nickel may increase in coming years, its abundant supply means that prices may not increase by as much as investors are hoping. Bigger miners may be able to ramp up production quite quickly to meet rising demand, which could keep prices low and even force out junior players.
How are market conditions changing?
Although it's usually a stable and staid commodity market, nickel has been grabbing headlines recently.
The price of the metal skyrocketed early in 2022, shortly after the onset of the Russia-Ukraine conflict. Russia is one of the world's largest exporters of nickel. The uncertainties around the impacts of the war and the effects of Western-imposed sanctions sent the global nickel market into chaos.
A short squeeze on the commodity finally forced the London Metals Exchange to halt nickel trading for 12 days in March 2022 after prices surged to more than US$100,000 a tonne. For some context, the nickel price had barely edged above US$20,000 a tonne at any time over the previous decade.
Since then, the nickel price has stabilised closer to US$25,000 a tonne. While that might be a significant fall from the heady days of March 2022, it is still materially above the historical average. At a time when you would expect rising interest rates and a slowdown in the Chinese economy to dampen demand, the nickel market appears to be surprisingly resilient.
Are ASX nickel shares right for you?
Investing in nickel is one of many ways to tap into the global renewables transition. Its use in the lithium-ion batteries required to charge EVs and other environmentally friendly technologies could see demand for the metal quickly outstrip supply in coming years, potentially pushing up the price of ASX nickel stocks.
However, recent history has shown that even the nickel market isn't immune to price volatility. This shows how important it is to always carefully consider your personal financial situation and risk appetite before deciding to make any investment – and investing in ASX nickel stocks is no different.