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 ArcelorMittal S.A. (NYSE:MT) 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.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
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.
A close-up of industrial machinery used for steel production, the sparks flying off the sides.
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.
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ArcelorMittal S.A. (NYSE:MT)
Average Upside Potential: 21.5%
ArcelorMittal S.A. (NYSE:MT) operates as an integrated steel and mining company in the US, Europe, and internationally. The base metals used by the company include zinc, tin, and aluminum for coating, aluminum for deoxidization of liquid steel, and nickel for producing stainless or special steels.
ArcelorMittal S.A. (NYSE:MT)’s growth momentum is expected to be aided by growth projects and decarbonization efforts. The company expects that its strategic growth projects should add a total of $1.8 billion of new EBITDA, and $1 billion of this is expected to come over the next 2 years. This provides ArcelorMittal S.A. (NYSE:MT) a significant boost on top of the expected cyclical recovery.
Over the past 12 months, the company generated investable cash flow of $2.8 billion, with a net $0.6 billion allocated to M&A, $1.5 billion invested on strategic growth capex projects, and $2.0 billion returns to ArcelorMittal S.A. (NYSE:MT)’s shareholders while maintaining a strong balance sheet. The company has been optimizing its decarbonization pathway to ensure that it can remain competitive and achieve an appropriate return on investment. ArcelorMittal S.A. (NYSE:MT) has reaffirmed its commitment to a $10 billion decarbonization target by 2030.
With the help of its global asset portfolio, the company is uniquely positioned to capture the expected growth in steel demand over the medium/long term. ArcelorMittal S.A. (NYSE:MT) continues to build its portfolio of renewable energy projects in a bid to secure and decarbonize its future electricity needs. In August 2024, ArcelorMittal Brasil managed to sign contracts focused on the development of 2 solar energy projects with a combined capacity of 465MW, equivalent to 14% of its current electricity requirements in Brazil.
Wall Street analysts have an average target price of $31.95 on the shares of ArcelorMittal S.A. (NYSE:MT).
Overall, MT ranks 5th on our list of best nickel stocks to invest in according to analysts. While we acknowledge the potential of MT 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 MT 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.
