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Resurfacing of Nickel Industry

Nickel LME price dropped to c. USD15,600/ton around January to February amid the exponential supply growth rate which far exceeds the demand growth rate. This nickel price level is approaching their lowest level in 2021 which spreads concern on the industry.

Source: Sucor Sekuritas Research

On its lowest price, the nickel miners are bleeding from the higher cash cost compared to their selling price. The situation has led the majority of small scale nickel players to either turn on survival mode or accepting defeat by closing down operation and selling their asset before further loss.

Further concern rose when BHP announced the possibility of Nickel West operations closure, risking 3,300 workers across BHP's Nickel West business, which includes the Kalgoorlie nickel smelter.

However, recently we've seen quite a rally from the nickel price, advancing from its bottom c. USD 15,600 / ton to c. USD 18,300 / ton. We see that this is likely to be caused by the closing down of nickel related projects that was mentioned earlier which cause supply to deplete and push the price higher one the back of rising scarcity.

The rise of nickel LME price has supported nickel companies' share to go higher, as seen on ANTM, NCKL, and INCO YTD performance chart below.

Price Performance of:

LME Nickel (blue), INCO (Orange), ANTM (Purple), NCKL (Yellow)

Source: Bloomberg

We believe nickel related industry currently has a limited downside as we believe most of the bad sentiments has been priced-in, and in our view, the nickel price is unlikely to go lower from current price unless for a new surprise in the market. We recommend to put NCKL, ANTM, MBMA and INCO into stock watchlist to make sure that one can utilize current momentum in nickel price rebound which already translates to the share prices.

Source: Sucor Sekuritas Research

Among the nickel related stocks, NCKL might be the best option to go long, in our view. We see that due to NCKL's strong EBITDA and net margin is the highest among its peers, which makes NCKL standout under current circumstance of low nickel price.

Source: Stockbit


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