How to Invest in Nickel

What factors impact nickel demand?

Once extracted, nickel ore is primarily used as a refined metal; as mentioned, more than two-thirds of the global market is put towards the production of stainless steel. The aerospace industry prizes refined nickel for its resistance to corrosion and uses it in spades as a component of superalloys. The metal is also used in coins, catalysts and chemicals, foundry products and plating.

As stainless steel is the largest source of demand for nickel, increasing nickel consumption is often fueled by developing countries in the midst of infrastructure expansions. Indeed, since the early 1990s, the nickel price has seen steep climbs and descents due to changes in economic growth.

For instance, the collapse of the Eastern Bloc led to significant nickel oversupply and a plummet in the metal's price that was not corrected until the early years of the 21st century. Nickel peaked at US$54,050 per MT in May 2007 after the market registered a deficit of 44,000 MT the previous year. In 2022, a short squeeze drove LME prices above US$100,000, but the exchange suspended trading and cancelled trades.

Nickel prices have become increasingly affected by the metal’s use in EV battery cathodes as the world seeks to reduce carbon emissions in the battle against climate change. Global demand for the metal from the EV battery industry is expected to increase more than 40-fold by 2040, according to the International Energy Agency.

What are the ways to invest in nickel?

There are four ways to gain exposure to the nickel industry: exchange-traded products (ETPs), futures, physical metal and stocks.

Nickel is included in many broad-based metals ETPs, including the Invesco DB Base Metals Fund (ARCA:DBB) and the iPath Series B Bloomberg Industrial Metals Subindex Total Return ETN (ARCA:JJM). These products offer exposure to baskets of metals, including copper, zinc and aluminum. For those seeking targeted exposure to nickel, the iPath Bloomberg Nickel Subindex Total Return ETN (ARCA:JJN) may be an interesting choice; this product is linked to an index of nickel futures.

Nickel futures themselves trade on the LME under the symbol NI. These nickel futures contracts represent 6 MT of nickel and are priced in US dollars per MT. Clearable currencies include the US dollar, yen, pound and euro.

Getting direct exposure by buying physical metal and holding it may be tempting, but it's worth noting that storing nickel of any material value would likely be challenging.

Finally, investors can buy shares of companies engaged in nickel production, discovery and extraction. Some major nickel miners trading on the TSX include First Quantum Minerals (TSX:FM,OTC Pink:FQVLF), Lundin Mining (TSX:LUN,OTC Pink:LUNMF) and Hudbay Minerals (TSX:HBM,NYSE:HBM), and there are many TSXV-listed junior companies exploring for the base metal around the world.