Rheinmetall, Power Nickel, Nio - The situation is getting critical

Power Nickel - Hope of the West

In addition to lithium, cobalt and rare earth metals, nickel is increasingly playing a key role in electromobility. In addition, the critical metal is used in electrolysis for hydrogen production, in thin-film solar cells, and wind turbines for alloys. The German Raw Materials Agency estimates that global nickel demand is likely to increase from around 2.4 million tons today to up to 3.4 million tons by 2025.

However, as with other critical raw materials, the largest deposits are not in Europe or North America, but in this case, in the Southeast Asian country of Indonesia. Here, too, Chinese companies have already acquired a stake in the largest production facilities, so if trade relations continue to tighten, Western nations could once again lose out on procurement.

A hopeful alternative is currently being built by the Canadian company Power Nickel with its main project, Nisk, located in Quebec. The concession area covers a significant property with a 20 km strike length. Power Nickel is focused on expanding the historic high-grade nickel-copper platinum group metal mineralization with a series of drill programs aimed at testing the original Nisk discovery zone and exploring the property for adjacent potential nickel deposits.

Currently, the Company holds a 50% interest in Nisk, with an option for an additional 30% available upon submission of a NI 43-101 technical report that includes a resource estimate. This is expected to be completed this year, according to the Company. To fund this and continue the exploration and drilling program into the first quarter of 2024, the Company issued a total of 4.5 million new shares at CAD 0.50 at the end of September 2023, raising gross proceeds of CAD 2.75 million for Power Nickel.

Power Nickel's stock is consolidating in the CAD 0.20 range after a sharp rise earlier this year. With a positive presentation of the technical report and ongoing drilling results, the yearly high at CAD 0.35 could well be tackled.

Rheinmetall - Further rise expected

The integrated technology group from Düsseldorf, Germany, has risen like a phoenix from the ashes, especially since Russia invaded Ukraine. It is now considered one of the most important suppliers to NATO and its partners. Due to the planned further armament of the Western world, the order books should continue to be consistently filled in the coming years. One problem that could arise here is the shortage of critical raw materials such as rare earth metals, which could put pressure on Rheinmetall's margins due to the rising prices.

As the most important supplier to the German armed forces, Rheinmetall received a further order to supply artillery ammunition. This is already the third call of a framework agreement concluded in July and has a term until 2029, with a potential order volume of around EUR 1.2 billion.

With the further increase in order volume, analysts see further potential for the DAX company despite the enormous share price increases. In this context, the US investment bank Goldman Sachs raised its forecasts for 2023 and 2024 and its price target from EUR 319 to EUR 320 and reiterated its "Buy" vote.

Nio - Dangerous situation

In contrast to the flourishing defense group Rheinmetall, the chart picture of the electric car manufacturer Nio is clearly negative. At USD 7.58, the share is only marginally ahead of its yearly low at USD 7.00. A slide below the striking support zone would generate further downside potential to the area around the 2019 annual high at USD 5.65. Since the beginning of the year alone, the Nio share price has lost almost 30% in value.

The analyst consensus on Reuters Refinitiv sees the average price target for Nio at USD 13.25, reflecting a potential upside to the current price of 75%.

Strategically, according to local media, Nio plans to gain independent production to increase operations and efficiency in the long term. Thus, the electric carmaker plans to acquire both factories jointly operated with state-owned Jianghuai Automobile Group and apply for its own production license. It is already known that JAC wants to sell some of its factories. The sums involved are said to be in the region of EUR 600 million. Confirmation from Nio's management is still pending. They intend to comment on this move only "in due course", as "Car News China" published on its portal.

Rheinmetall shares continue to benefit from orders from Western armed forces. Electric carmaker Nio is planning to obtain its own production license. At Power Nickel, the expected release of a positive NI 43-101 technical report should bring new impetus. In addition, the stock is set to benefit in the long term from increasing demand in the renewable energies sector.