Nickel's solid appeal

Synopsis

Investors consider the potential of nickel as its price has halved since 2014, currently trading at around $4 per pound. Goldman Sachs forecasts that nickel supply will triple in 2018, driven by increased production from smelters in China and Indonesia. This oversupply, coupled with destocking by traders, raises concerns about profitability, as 40% of global nickel output is already losing money. However, the demand from battery makers for electric vehicles may provide a boost, especially as China accounts for over half of global nickel consumption, expected to grow at 6% annually over the next two years. Additionally, environmental regulations in Beijing may impact the polluting practices of Chinese manufacturers, potentially leading to a supply adjustment. Investors are advised to focus on nickel producers with direct exposure to the metal, as larger miners like Glencore have less involvement in nickel production.