Nickel Stocks are on Fire. Here are Top 3 Indian Companies to Watch Out for...

Tracking the footsteps of crude oil, other key commodities too hit multi-year highs in the backdrop of the ongoing Russia-Ukraine conflict.

Nickel prices have risen by more than 100% in recent days as a result of the Russia-Ukraine conflict, which has caused a scarcity of the metal, threatening to impede manufacturing of batteries for electric vehicles.

The rising pricing may potentially have a huge impact on the EV industry's profitability.

Prices of Nickel soared by as much as 111% on 8 March 2022, momentarily surpassing US$ 100,000 per tonne. The London Metal Exchange (LME) suspended the trading of nickel on 8 March after prices more than doubled - reaching a record high of US$ 101,365 per mt in early trading, after closing at US$ 48,078 per mt on 7 March 2022.

To get a clear view, look at the chart below -

Nickel is mainly used in the production of stainless steel and other alloys and can be found in food preparation equipment, mobile phones, medical equipment, transport, buildings, and power generation.

The biggest producers of nickel are Indonesia, the Philippines, Russia, New Caledonia, Australia, Canada, Brazil, China, and Cuba.

Among these nations, Russia is one of the world's biggest suppliers of the metal, and the fear of sanctions or the inability to ship the metal has spooked an already tight market.

India is one of the biggest importers of Nickel.

To reduce the supply constraints, many top Indian players have started pushing their Nickel production capacity to meet the increasing demand.

Take a peek at these top 3 stocks that are positioned to transform India's Nickel industry.

1. Vedanta

Vedanta is an Indian multinational mining company headquartered in Mumbai, with its main operations in iron ore, gold and aluminium mines in Goa, Karnataka, Rajasthan, and Odisha.

It's a well-diversified natural resource group engaged in exploring, extracting, and processing minerals and oil & gas.

The group engages in the exploration, production and sale of zinc, lead, silver, copper, aluminium, iron ore, and oil & gas. It has presence across India, South Africa, Namibia, Ireland, Liberia, & UAE.

Its other businesses include commercial power generation, steel manufacturing & port operations in India and manufacturing of glass substrate in South Korea and Taiwan.

Moreover, the company is the largest private sector crude oil producer in India.

Recently, in an interview with a leading financial daily, Anil Agarwal, Executive Chairman, Vedanta said,

• In these geopolitical situations, we have to be self-reliant. We produce practically the entire spectrum of commodities. Nickle is also very important. We are trying to acquire a company for Nickel under the IBC process.

The company is planning to start commercial production of nickel alloy by April, with a capacity of around 3,000-4,000 tonnes.

In December 2021, Vedanta acquired Nicomet, producer of nickel and cobalt in Goa, for an undisclosed amount. With the acquisition, Vedanta became India's sole producer of nickel.

The move is a significant step in Vedanta's mission towards making India self-reliant in key critical minerals. The acquisition of Nicomet is in line with Vedanta's Environmental, Social, and Governance (ESG) mission and is a big step to support India's carbon neutrality goals.

Due to the Russia-Ukraine conflict, the value of India's nickel and cobalt imports has been growing rapidly.

With Vedanta's foray into production of these critical minerals, India will put it in a better position to manufacture EV batteries, the main component for EV vehicles and support the production of high-quality steel products, a key building block for Infrastructure growth.

The acquisition comes at a time when the nickel market is tightening with a surge in battery

demand, supply chain disruptions and an increase in global stainless-steel production in recent years.

The stock of the company has delivered good returns of 70% to its shareholders in the last 12 months. On year to date (YTD) basis, it has rallied up to 7% in a subdued market.

To know more, check out Vedanta's factsheet and its latest quarterly results.

2. Hindustan Copper

Hindustan Copper (HCL) is a government-owned corporation in the central public sector enterprise under the Ministry of Mines (India).

HCL is the only vertically integrated copper producer in India engaged in a wide spectrum of activities ranging from mining, beneficiation, smelting, refining, and continuous cast rod manufacturing.

The firm holds a lease on more than 80% of country's copper reserves. The company has well developed infrastructure facilities, vertically integrated operations & wide distribution network with well-established customer base.

HCL's main products are - continuous cast copper rod, copper cathode, and copper concentrate. Copper sulphate, sulphuric acid, anode slime, and nickel hydroxide reverts, are its by-products.

Demand for Nickel is expected to increase due to the thrust on renewable energy, increased use of consumer durables and increased use of electric vehicles.

All the clean energy technologies use nickel!

Therefore, it very important for metal manufacturing companies to increase the production of nickel in India due to supply chain crisis caused by Russia's invasion of Ukraine.

Back in 2016, HCL inaugurated the nickel, copper, and acid recovery plant Jharkhand. This was the first facility in India to produce nickel metal of LME grade from primary resource.

Last year, the government announced the privatisation of Hindustan Copper. The stake sale may take place this year. Multiple investors including Vedanta Group are said to be interested in picking up stakes in Hindustan Copper.

In the past one year, shares of Hindustan Copper have delivered poor returns of 8% on the BSE.

To know more, check out Hindustan Copper financial factsheet and its latest quarterly results.

3. Jindal Stainless

Jindal Stainless is one of the largest manufacturers of stainless-steel flat products, in Austenitic, Ferritic, Martensitic and Duplex grades in India used in a variety of industries like automobile, railways, construction, consumer goods etc.

The group - through its manufacturing plants in Hisar, Haryana, and Jaipur, Odisha, has achieved the feat of being the largest manufacturer of SS flat products in India.

Its capabilities to make a wide variety of grades across all series of SS (mainly 200, 300, and 400 series - based on content of nickel and other alloys) helps the group cater to a diversified end-user base.

The company's profitability is largely dependent on the prices of inputs, mainly nickel and chrome ore.

Although it has undertaken several measures that have improved its operating performance. The company's plant is in Odisha, which has 93% of India's chromite ore reserves (apart from nickel, chrome is a key input in making SS) and is supported by a captive 264 megawatt (MW) power plant which meets the bulk of its electricity needs.

While Jindal Stainless is the largest SS player in India, it faces competition from imports mainly from Indonesia, which is a low-cost producer of SS as it has nickel deposits (main input for 300 series SS), and China.

Recently in a statement, the company's MD Abhyuday Jindal said the company has a healthy order book and is mainly focusing on exports. So the impact of Russia-Ukraine war on its business is not much.

He further added,

• Among other uncertainties that the world is currently facing, we are witnessing never-seen before spikes in prices of Nickel. As a proactive step to address volatility and contain risk, we continue to follow a prudent risk management policy to sync our sales order and raw material booking on a real time basis through increased coordination between our supply chain stakeholders.

As the company has low dependence on Russia for raw material, the company's stock has not seen any steep up move as is visible on many commodity stocks nowadays.

The company sources majority of the nickel from scrap, within India, Indonesia, and some quantity from Europe. But still, higher nickel prices support the company.

Over the year gone by, shares of the company have gained a massive 150% while in the recent week, the stock fell 8%.

To know more, check out Jindal Stainless financial factsheet and its latest quarterly results.

What next?

As Russia is one of the world's biggest suppliers of Nickel, sanctions and supply shortage fears have spooked an already tight market. When the metal saw the biggest daily gain on Monday, liquidity deteriorated dramatically as sellers rushed to the sidelines. This lead to steep rise in prices.

Nickel is a key ingredient in stainless steel and electric-vehicle batteries. According to reports, more than 70% of the global supply of nickel goes into making stainless steel.

While only 7% of the nickel supply goes in EV batteries, the metal has been in talks because of the exponential growth prospects of batteries and is projected to see a boom in the coming years.

In recent years, automakers have discovered that adding more nickel to the cathode can boost a battery's energy density, which translates into more range per pound of batteries. Now with concerns about supply, automakers may see a bump in the road for their EV plans. Not all EVs will be affected but prices for a few will go up.

Last month, we reached out to India's #1 trader Vijay Bhambwani, to ask him about what's the course of action in a situation of war and how it will impact commodities.

You can read the entire interview here: How the Threat of War is Roiling Commodity Markets.

As you're interested in commodities, check out Vijay's video where he discusses why 2022 is going to a great year for commodity trading.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...