Growing EV Market Makes Nickel Miners an Attractive Option

The ongoing electrification push in the automotive market will spur heavy demand for nickel. In turn, this makes nickel mining stocks an attractive option or more specifically, the Sprott Nickel Miners ETF (NIKL).

A glut in electric vehicles (EVs) may mean that demand has yet to catch up with supply. However, as the global transition to reaching zero emissions continues forward, EVs should eventually gain more widespread consumer use. Therefore, Nickel will play a vital role in manufacturing vehicles.

“For electric vehicles to go fully mainstream, they need longer battery ranges and faster charging times – both of which nickel can provide,” a Sprott report noted. “Nickel lends a greater energy density to batteries, allowing for ‘more battery’ at a lighter weight,” and advancements in battery technology means that “industry players expect these higher-nickel battery designs to gain market share and dominate.”

It’s not just the EV market where nickel plays a pivotal role, but also wind and solar energy. 2023 was a record year for renewable energy with solar and wind power usage rising. Moving forward, nickel’s extended battery life and faster charging capabilities will be important for power grids. In addition, it will be vital for wind and solar usage.

“These systems help to balance power supply and demand, provide backup power, and stabilize an electrical grid,” the report added. “They can also store excess energy produced from renewable energy sources like wind and solar.”

NIKL provides a broad-based exposure to this unique investment opportunity.

The Only Pure-Play Nickel ETF

NIKL is the only ETF to provide focused exposure to nickel miners. Per its fund description, NIKL seeks to provide investment results that track the total return performance of the Nasdaq Sprott Nickel Miners™ Index (NSNIKL™). The index, in particular, tracks the performance of a selection of global securities in the nickel industry. These include nickel producers, developers, and explorers.

The fund comes with a 0.75% expense ratio. It offers global diversification to investors for growth exposure. Demand for nickel is gaining momentum during the worldwide energy transition phase. Its country breakdown includes holdings in Indonesia, Australia, and Canada to round out the top three.

“In our view, nickel miners are poised to offer investment attractive opportunities to investors,” the Sprott report added. “Although nickel prices declined in 2023 on the back of softer Chinese EV sales and a flood of supply from Indonesia, the metal has been rebounding thus far in 2024 and benefiting the prospects of mining companies. The rise in nickel prices seems to be a combination of investor sentiment, potential supply constraints, and the underlying long-term demand for nickel in the clean energy transition.”

Figure 5. Nickel Supply and Demand Imbalance Likely to Invert

Figure 5. Nickel Supply and Demand Imbalance Likely to Invert

Source: Bloomberg NEF. Data as of 3/01/2024.

Summary of Salient NIKL features via Sprott’s product website:

  • Pure-play nickel ETF: The only U.S.-listed ETF focused on nickel mining companies that are providing a critical mineral necessary for the clean energy transition.
  • Essential to electric vehicles: Nickel is a vital component in the rechargeable batteries used for hybrid and electric vehicles (EVs) and clean energy storage.
  • Growing demand: With the recent discovery that adding more nickel to EV batteries increases their drivable range, energy transition-related demand for this critical mineral may increase nearly 10 times by 2040, relative to 2022.
  • Well-positioned companies: Companies that are upstream in the supply chain may be well positioned to benefit from the increased investment in nickel necessary for the clean energy transition.

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