Why this miner predicts Europe will demand green nickel

The $17.5 million minnow has two tenements in Finnish Lapland, and is still in the early stages of exploration. Ross expects the market shake-out will eventually carve world demand into two tracks – a “bifurcation” between Chinese and European demand that will ultimately benefit Nordic Nickel.

He is also confident that worldwide demand for nickel will eventually start climbing again as the energy transition gathers pace, at which point customers will run headlong into a supply shortage.

That is because the market ructions right now are forcing companies to conserve capital, which is stifling exploration – storing up a production shortfall down the track.

“We’re funded, from the money we raised last year, to do some exploration work. But not as much as we would like to. We would always like to do more. But we have to be very conscious of the fact that the market is pretty negative,” he says.

“So if we were to go and spend all that money right now, then we’re coming back to the need to raise money again, and you don’t want to be doing that while the market’s depressed.”

The consequence, for Nordic Nickel and for other explorers, Ross says, is that “you don’t get the exploration done” – which will eventually set off a reversal of the cycle.

“If you look at the predicted demand, we need all of that Indonesian nickel. And we need all the sulphides, in particular the ones that have been shut down. And we need a lot more by 2030,” he says.

“So then by the time Indonesian suppliers settle down, and you need all the other supply to come in, you just don’t have the projects that have been explored and developed all ready to go.”

Even before this happens, Ross reckons the market will start to “birfurcate”. He says the glut coming out of Indonesia will almost entirely end up in China – and that might be one of the few markets with appetite for it.

“That nickel is low-grade, class-two nickel that has been converted into class-one now, but with very high-energy-intensity production facilities, from difficult power sources, coal-fired generation,” Ross says.

European battery makers and auto giants, though, are in the market for raw materials that come from within Europe, and have decent green credentials.

“When we talk to consumers, potential offtakers, in Europe, what they’re chasing first and foremost, is European-sourced. And there aren’t many mines,” he says.

“If they have to buy it on the market, it’s got to be sustainably sourced, and it’s got to be traceable. So that whole challenge around ESG components, the ESG factor, is really going to play out.”

But just how big a green premium will European car makers and consumers be willing to pay? After all, drivers seem reluctant to make the switch en masse into electric vehicles. And the European EV makers have to compete on price with Chinese imports.

Ross argues that while the nickel price is hanging low, EV and battery makers will swing back to nickel-based batteries, which have better range and charge times.

He also reckons that the Europeans will have no choice but to cleave to the value-add of higher ESG standards, particularly as Brussels starts imposing more regulations, including on battery recycling.

“What does that mean for pricing mechanisms? Hard to say … there are a lot of things still to play out,” he says. “But I think things are definitely heading in that direction, that bifurcation of the market.”

For Nordic Nickel, the sector’s downturn might actually have an upside.

“While the nickel market was hot, and Australian projects were going well, we were somewhat ignored, we always had the European discount applied, because everyone looked at it and went, ‘oh, it’s all too hard’,” he says.

“What was our disadvantage in the past is almost our advantage now, because there are really no listed ASX companies that have got decent scale projects in Europe that are focused primarily on nickel. So that’s a good thing.”

Still, the stock has not been immune from the downturn. A year ago, Nordic Nickel shares fetched well above 30¢. The price has more than halved, mostly trading between 12¢ and 14¢ a share since the start of this year.

For Ross, this means now is the time to partner up with players that have a longer-term view, like the mining houses or the automakers.

“That’s the source of capital that we need to try and tap rather than predominantly what is a retail market on the ASX for junior explorers,” he says.