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 Rio Tinto Group (NYSE:RIO) 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.
Aerial view of an open pit mine, with workers extracting minerals.
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Rio Tinto Group (NYSE:RIO)
Average Upside Potential: 29.5%
Rio Tinto Group (NYSE:RIO) is a multinational mining and metals company, which is engaged in producing nickel and other minerals.
Wall Street analysts remain optimistic about Rio Tinto Group (NYSE:RIO)’s definitive agreements with GravitHy in a bid to ramp up the decarbonization of steelmaking in Europe. As a part of this collaboration, Rio Tinto Group (NYSE:RIO) will supply high-grade direct reduction iron ore pellets from Iron Ore Company of Canada (IOC) operations to GravitHy’s planned operation, and manage the sales and marketing of ultra-low carbon Hot Briquetted Iron (HBI) GravitHy produces.
The steel produced with low-carbon emissions is a critical component of the net-zero energy transition. As per Rio Tinto Group (NYSE:RIO), the production of iron and steel contributes ~8% of global carbon emissions and needs new technologies, redesigned processes, and new infrastructure to decarbonize.
This collaboration is aligned with Rio Tinto Group (NYSE:RIO)’s steel decarbonization strategy to ramp up the development of low-carbon Electric Arc Furnace steelmaking with high-grade iron as feedstock. This should enable Rio Tinto Group (NYSE:RIO) to reduce its Scope 3 emissions and create valuable decarbonized pathways for high-grade iron ore. Rio Tinto Group (NYSE:RIO) remains focused on its decarbonization efforts.
In this regard, the company signed an MoU with China’s Nanjing Iron and Steel Co. on decarbonization technology in ironmaking. Both firms would be exploring pelletizing using extracts from the Rio Tinto site in Pilbara, Western Australia. Rio Tinto Group (NYSE:RIO) has moved from strategy to action on decarbonization and continues to make clear progress towards its climate targets: a 50% reduction in emissions by 2030 and net zero by 2050.
These alliances point to Rio Tinto Group (NYSE:RIO)’s decarbonization efforts, which should result in a reduction of carbon footprint and reach climate goals.
Overall, RIO ranks 3rd on our list of best nickel stocks to invest in according to analysts. While we acknowledge the potential of RIO 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 RIO 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.
