I have been thinking about a bullish case, but am not yet committed to it.
1. Current price is about US$9.6k a tonne. According to some data put out by Vale in 2015 this means over half of the world's Nickel production is currently running at a loss. So there is a case that eventually either the price needs to rise, the production costs need to fall, or consumption has to drop. The price would have to come up to about US$13k per tonne to include the 3rd quartile.
2. Current capital spend on new projects is low.
3. The majority of the 2000kt produced annually is used for stainless steel. If stainless steel consumption remains steady then there is potential for battery consumption to weigh in on demand. A 2016 quote from Glencore "Whilst the materiality is debated, we believe +60Kt of Ni demand in batteries today will multiply over the next 5 years to ~150-300Kt and potentially more."
4. There is potential for further environmental controls in China to limit the production of Nickel pig iron, and thereby the use of unrefined low/medium grade Nickel ore in Steel making. I am not sure but I think Nickel Pig Iron accounts for about 15-20% of world Nickel demand.
5. Nickel used per person in China is still well below the European rate, and of course Nickel used per person in India would be even further below. Continued industrialisation in these nations would see this rise.
I haven't looked into many Nickel stocks, however these are few I like.
WSA - heavily shorted, has no debt, good nickel assets, AISC (and of cash cost) is below current Nickel price, owns a bit of KDR and is looking at producing a bit of Nickel sulphide concentrate for sale to the battery markets through a mill enhancement project.
MCR - something reassuring about a company that can say it has only ever had one capital raising.
HIG - has a share in the Ramu Nickel mine in PNG (run by a Chinese co). It pays off the capex for its share out of the profits and is not liable when it is running at a loss. This would represent a lot of value in a better Nickel market. Note there are some ethical issues, there is a doco about a tribe being forcibly displaced when they constructed the mine.
(20min delay)