We recently published a list of 10 Best Nickel Stocks to Invest in According to Analysts. In this article, we are going to take a look at where Vale S.A. (NYSE:VALE) stands against other best nickel stocks to invest in.
Investing News Network highlighted that Nickel witnessed strong price momentum in H1 of the year as the prices took support from investor sentiment and speculation throughout commodity markets which saw a surge in prices for precious and base metals. Nickel prices remained volatile during Q3 2024 due to market speculation, Chinese stimulus, and oversupply.
Among the contributing factors was the supply of laterite nickel out of Indonesia, which led to mine curtailments in New Caledonia, Australia, and Europe. Furthermore, the increased demand for battery production in China is yet to reach the levels required to make up for the increased supply. Despite the EV sector in China showing a YoY increase of 32% during the first 9 months of 2024, the industry’s nickel demand was not able to make up for shortcomings in the broader economy.
Oversupply of Nickel
Nickel remains a critical component in NMC (nickel-manganese-cobalt) batteries, which are used in EVs. For the last few quarters, the market saw a significant oversupply of nickel from Asian markets, mainly from Indonesia. As per S&P Global, mined nickel production from the country saw an increase of 99,000 metric tons during Q3 2024 and is expected to be in the 2.4 million metric ton range by 2024-end, making up 57% of total global production. Despite growing demand for batteries, the oversupply situation has not been under control. This is mainly because of a weak Chinese economy.
China has been tagged as the largest consumer of nickel in the world as a majority of the metal is being used in stainless steel production. However, a difficult real estate sector and broad economic deflation impacted the demand. Investing News Network went on to say that Nickel found pricing support in September, with the Chinese government rolling out stimulus measures focused on fueling economic growth. The measures also included a 0.5% cut to the mortgages and a reduction in the downpayment to buy a home to 15% from 25%. Even though there was an initial surge in nickel prices after the package, the prices retreated once again.
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What Can Drive Nickel Prices?
Despite the challenging market conditions, Nickel’s long-term demand in the EV industry is robust. According to EV Magazine, as automakers prioritize the high-nickel battery chemistries because of range and performance advantages, nickel consumption should be fueled as a result of the global shift toward electrification.
As per Benchmark estimates, the battery nickel demand is expected to triple by the year 2030. Mid and high-level performance EVs are expected to fuel the growth of battery nickel demand in the coming years, mainly in Western markets. Benchmark projections demonstrate that nickel-based chemistries will capture 85% of battery cell production capacity outside of China by the year 2030. The batteries should make up for more than 50% of nickel demand growth by 2030, touching 1.5 million tonnes of nickel demand by the decade’s end.
Our Methodology
In order to compile a list of the 10 best virtual reality stocks to buy now, we utilized stock screeners, ETFs, and online rankings to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best virtual reality stocks to buy now have been arranged in ascending order of their hedge fund holders, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Vale S.A. (NYSE:VALE)
Average Upside Potential: 47%
Vale S.A. (NYSE:VALE) is engaged in producing and selling iron ore, iron ore pellets, nickel, and copper in Brazil and internationally.
Wall Street analysts opine that Vale S.A. (NYSE:VALE)’s Iron Solutions segment should fuel its long-term growth. In Q3 2024, Vale S.A. (NYSE:VALE) achieved its highest iron ore production since 2018 and has also increased its 2024 production guidance to the upper end of the 323 to 330 million tons range. Also, the company’s C1 cash costs in iron ore declined by 17% QoQ and 6% YoY.
Vale S.A. (NYSE:VALE) plans to accelerate the execution of its premium iron ore strategy, leveraging on its unique endowment. The company possesses one of the richest iron ore resources in the world, and it aims to structurally produce ~350 million tons of iron ore. Out of this, 80% – 90% will be high-quality products, such as BRBF, Carajás, and agglomerated products. This flexible portfolio should enable Vale S.A. (NYSE:VALE) to support its clients in their decarbonization journey.
Also, the company remains focused on driving its nickel business. GEM Co., a Chinese battery-metal producer, and Vale S.A. (NYSE:VALE)’s Indonesian unit signed an agreement to establish a $1.42 billion nickel plant in the Southeast Asian nation, highlighting the country’s drive to boost processing. Industry experts remain optimistic about this development as Indonesia makes up for over half of global nickel production. The country has been seeking overseas investment in its processing industry to tap the increasing demand for EV batteries.
Wall Street analysts have an average price target of $15.39 on the shares of Vale S.A. (NYSE:VALE).
Overall, VALE ranks 2nd on our list of best nickel stocks to invest in according to analysts. While we acknowledge the potential of VALE as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than VALE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.