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For those who thought the days of the French Revolution were ancient, the recent protests and upheavals in New Caledonia prove otherwise. Just like two centuries ago, people are taking to the streets.
But why is the world obsessed with this tiny French territory in the South Pacific?
It’s not just because of what’s going on there, but because of what’s there: 6% of the world’s nickel reserves. The French Eramet plant has already felt the impact of the protests.
With the island’s metal production at a standstill, prices for this valuable resource have soared to their highest level in nine months, reaching a chilling $21,150 per tonne.
And if that wasn’t enough, the news that the French government has lost control over part of New Caledonia and declared a state of emergency hasn’t exactly lifted spirits.
Now, to be fair, the rise in nickel prices was also fueled by hopes of increased demand from China, thanks to measures aimed at reviving the local property market.
In addition, the International Energy Agency is forecasting an increase in demand for nickel and other minerals crucial to the transition to cleaner energy sources.
But wait, there’s more: mining license delays in Indonesia and sanctions on Russian aluminum, copper and nickel have added to the mix.
Will this growth spurt last?
There is still room for upside. However, a price correction is also possible, especially when the situation in New Caledonia stabilizes, and supply from Indonesia and China increases.
On top of that, traders seem to agree that the nickel market is oversupplied, suggesting that the current rally will not be sustained for long.
However, Goldman Sachs analysts are optimistic and expect a resurgence in “battery” metals, including nickel, thanks to the booming Chinese electric vehicle industry.
What is the bottom line?
Well, nickel and the shares of companies like BHP Group, which are involved in its mining, still have plenty of room for growth from a historical standpoint and are worth considering and analyzing with the help of a stock screener.
But jumping headlong into the metals market and hoping for a return to last year’s prices may be premature. In any case, do your own research before making any decisions.
