Dave Gilbert here, Editor of Smart Money.
“A penny for your thoughts” sounds a bit ridiculous nowadays. We may not all be Albert Einsteins… but a penny?
At the time of its first-known use in 1522 by Sir Thomas More, a British penny was actually worth something. Turns out the person willing to plunk down that penny for your thoughts wasn’t insulting you after all.
Well, with inflation at its highest level in decades, it’s time we up the ante on this centuries-old expression. How about…
A nickel for your thoughts.
That doesn’t sound like much of an upgrade, does it? But here’s the kicker — nickel prices skyrocketed after Russia invaded Ukraine.
You may or may not become rich getting a nickel for your thoughts, but investors should be aware of what’s going on with this metal that is critical in our technologically advancing world…
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Dramatic Price Surge
You’re probably familiar with “circuit breakers” in the stock market. They work the exactly the same as breakers in your home. They shut down when the circuit — or the market — gets dangerously overloaded.
Breakers were first used in the market after “Black Monday,” Oct. 19, 1987, when the Dow suffered its biggest one-day percentage drop in history — a 22.6% gut punch. The breakers were modified a couple of decades later after largely failing in the “Flash Crash” on May 6, 2010, when the Dow dropped 1,000 points in just 10 minutes.
More recently, circuit breakers kicked in twice during March of 2020 as stocks crashed over growing concerns about the Covid-19 pandemic and related shutdowns.
Just recently, the London Metal Exchange halted trading in nickel after prices doubled in just hours. The price spike looks dramatic even on a 10-year chart.
The reason was Russia’s invasion of Ukraine and subsequent economic sanctions. Russia produces about 10% of the world’s nickel, so that’s a pretty big chunk to be taken out of an already tight supply.
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Nickel has multiple uses, most commonly in manufacturing stainless steel and coating other for protection and corrosion resistance. And yes, a nickel is made up of 25% nickel, which sounds weird but is true. (The other 75% is copper, which is also moving higher.)
The Potential Impact of Batteries
Perhaps most significant of all, one Russian company — Norilsk Nickel (OTCMKTS:NILSY) — produces nearly 20% of the world’s battery-grade nickel. Any potential shortages would coincide with what Eric Fry calls “a battery metal rush that would push prices higher for copper, nickel, and other metals that electric technologies require.”
That sets up the “revenge of the miners,” as characterized by Ivanhoe Mines founder Robert Friedland. Because electric vehicles (EVs) require large quantities of metals like copper, nickel, lithium, and manganese, mining companies have become the newest heartthrobs of the global auto industry.
As the renewable energy boom gains momentum, it will produce an echo-boom in demand for key battery metals. Here’s Eric…
“‘Revenge of the miners’ is the phrase one prominent mining executive coined to describe the bounty that could rain down on ‘battery metal’ producers, as the renewable energy boom becomes a multi-decade revolution.
“The ‘revenge’ to which this executive refers is the mining industry’s reputational makeover from environmental ‘bad boy’ to renewable-energy ‘BFF.’
“For decades, the mining industry has attracted widespread scorn as a ‘planet abuser.’ But gradually, as mining practices have become (somewhat) more ecologically conscious, and as battery metals have become increasingly essential to the renewable energy boom, polite society has grudgingly readmitted the mining industry to its ranks.
“The mining industry’s ‘revenge’ also happens to include a handsome payday… especially for the courageous companies that invested to expand their production during the last few years, even though metals prices were low.”
Norilsk Nickel, or Nornickel, is the world’s largest nickel miner. Its stock has been a disaster. It just resumed trading in Russia on Thursday after a month of inactivity as the Moscow Stock Exchange suspended operations because of the war, and its ADR shares in the U.S. are down 90% since the start of the year.
The second largest nickel miner is Brazil’s Vale S.A. (NYSE:VALE), followed by Swiss giant Glencore plc (OTCMKTS:GLNCY). Those stocks are up between 30% and 45% in just the first quarter.
Eric’s top mining recommendation concentrates on other important metals, but it has gained 23% in 2022 and has quadrupled in the two years since he recommended it. The battery metals rush is alive and well, and this company now uses artificial intelligence to boost production.
Other miners are adopting AI as well, so we may see this modern technology become even more important should nickel supplies shrink for an extended period of time.
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A nickel shortage — and potentially much higher prices — would come in the early stages of a massive worldwide transition from combustion-based modes of power generation to renewable modes that fuel an array of electric- and battery-based technologies.
EVs may be the biggest. EV sales tripled from 2019-2021 to 6.6 million, but that was still just 9% of the global car market. There’s a ton of room for growth ahead, but it only happens with effective batteries.
The cathodes in some of the newest lithium-ion batteries for EVs are now 90% nickel. The standard is closer to 60%, but even that is double the amount of nickel from just a few years ago.
Keep an eye on nickel prices and supplies. Now is not a good time for a shortage, as it is instead a time of a massive worldwide transition from combustion-based modes of power generation to renewable modes that fuel an array of electric- and battery-based technologies.
As Eric has been urging, investors may want to consider adding or upping their exposure to mining companies providing metals essential to hypergrowth energy storage technologies.
Editor, Smart Money
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On the date of publication, Dave Gilbert did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends… before they take off. In fact, Eric has recommended 41 different 1,000%+ stock market winners in his career. Plus, he beat 650 of the world’s most famous investors (including Bill Ackman and David Einhorn) in a contest. And today he’s revealing his next potential 1,000% winner for free, right here.