Nickel as a strategic defense metal scarcer than expected: Lockheed Martin, Glencore, and Power Metallic Mines

Nickel is needed almost everywhere – Quality is key

Nickel is primarily found in alloys, such as stainless steel. Nickel is also used in aerospace, shipping, the energy sector, the chemical industry, electronics, vehicles, and medical devices. Nickel-containing stainless steel also makes kitchen appliances, pots, and pans hygienic, visually appealing, and durable. Nickel is also found in electronic devices such as laptops and cell phones, as well as in heating coils for various electrical appliances. Furthermore, nickel is considered the metal of the energy transition, as confirmed by the International Energy Agency. It is found in cathodes for rechargeable batteries and is important for the production of green hydrogen. Nickel is a versatile metal and is essential for future industries. This is why the EU considers nickel not only "critical" but also "strategic". But what is the real situation regarding supply?

In 2023, more than half of the world's nickel supply came from Indonesia. It was followed by the Philippines (11.3%), New Caledonia (6.5%), Russia (5.6%), Australia (4.5%), and Canada (4.5%). However, these statistics do not take into account the different quality grades of nickel. Class 1 nickel is characterized by a purity of 99% and comes mainly from Russia. With a 20% share of the global Class 1 nickel market, Russia plays a pivotal role in the global supply chain. The analysts at the Oregon Group already identified a "Russia problem" in the nickel market in 2023 and predicted a supply deficit by 2028 at the latest. However, this forecast did not yet account for the recent defense spending boom, meaning the shortage could arrive even sooner. Defense companies like Lockheed Martin are dependent on nickel and receive support from the US Pentagon, with which the Company has been working closely for decades. The situation is different for high-purity nickel. As the McKinsey Metals Report predicts, demand for high-purity nickel could exceed supply by 15% annually through 2030.**

Glencore reduces stake in New Caledonia

To benefit from this market development, investors can focus on companies in the raw materials sector. For many years, Glencore was considered one of the most important nickel stocks. However, in 2024, the Company sold its stake in a joint venture in New Caledonia. Even generous subsidies from France could not change Glencore's mind. Although the Company still produces nickel, it is just one of many metals it produces, alongside copper, cobalt, zinc, lead, ferroalloys, aluminum, iron ore, gold, and silver.

Power Metallic Mines shows signs of profitable production

The situation is different at Power Metallic Mines. Although the Company, formerly known as Power Nickel, is known for its polymetallic discoveries, high-purity nickel still plays an important role. The Company is developing the NISK project in Canada as a modern, sustainable deposit. Power Metallic Mines focuses on sustainability right from the exploration stage in order to appeal to potential industry partners who have high standards for their suppliers. Power Metallic Mines' sustainability strategy is also favored by the unique geology of the NISK deposit, where ultramafic rock binds CO2.

A summer drilling program is currently underway, for which the Company has brought a total of six drilling rigs to the property. Initial reports from the drilling program were positive in July. According to these reports, Power Metallic Mines has already analyzed around half of the more than 100 samples and is very satisfied with the results. Two mineralogically favorable sulfides have been discovered, which can also be profitably mined at other deposits. The Company plans to present the complete analysis in the coming months and then start a metallurgical test phase. The goal is to develop the NISK deposit into a profitable polymetallic mine.

Power Metallic Mines shares: Prospects not yet priced in

The stock of Power Metallic Mines has been moving sideways with high volatility in recent months, with no clear trend apparent. However, the stock still outperformed commodity giant Glencore. Neither stock seems to be benefiting from the current defense hype. The fact that the increased demand from the defense sector for stocks such as Power Metallic Mines is not yet priced in could present an opportunity for long-term investors. If the upcoming results from the summer drilling program and other analyses confirm the economic potential of the NISK deposit, Power Metallic Mines shares could be in for a revaluation. There are no immediate signs of a turnaround, but the long-term potential remains intact.