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GPF Physical Nickel ETC

GPF Physical Nickel ETC

This is the only physically-backed Nickel ETC available on the European market.

  • Competitive TERs

  • Physically backed with nickel in warehouses

  • Ownership tracked with Distributed Ledger Technology

Investment Case for Nickel

Applications

Data from the specialist consultancy Roskill suggests that the dominant ‘first use’ of nickel is in the production of stainless steel (70%), with other nickel and copper-based alloys (8%); other alloys and steels (8%) and nickel-plating (8%) all making significant contributions. The use of nickel in batteries (both conventional and in Electric Vehicles), currently accounts for 5% of nickel demand, but is growing rapidly. 

Nickel has vast applicability in ‘end uses’. Roskill currently estimates that some 35% of nickel produced is used in engineering applications, 19% in various metal goods, 16% in transportation, 15% in construction and 11% in the electronics industry. Thus nickel, nickel compounds or nickel alloys can be found in such places as skyscrapers, automobiles, airplanes, medical instruments, coins, cutlery, glass, ceramics, and nuclear power stations. Nickel also is a vital component of fuel cells, electrical vehicle batteries, onshore and offshore wind turbines, solar panels and geothermal energy delivery systems.

Investment Qualities

Like other metals, nickel has a number of attractive qualities as an investment including:

  • Provides diversification

  • Is a play on Electric Batteries

Like most metals, nickel has historically exhibited low correlation to the performance of equity and debt markets. Over the last 20 years, the correlation of spot nickel to equity and debt markets is only 0.5 and 0.3 respectively 1. With such a low correlation to equity and debt markets, even small allocations to nickel provides meaningful improvements in the efficiency and risk characteristics of a 60/40 portfolio.

Many investors don’t like metals like nickel as an investment, as it pays no income stream whilst incurring storage costs. However, today we also live in a world where cash pays little to no interest and government bond yields are low-to-negatively-yielding which makes the argument against holding nickel a lot less relevant. It is also worth noting that according to the IMF 2, pandemics typically depress real interest rates over multiple decades which again implies a favourable environment for investing in nickel.

The Lithium Nickel Battery

When it comes to Electric Vehicles most laypeople call lithium batteries to mind, however the less-mentioned metal, Nickel, can comprise up to 80+% of these batteries according to the Nickel Institute, which explains why Elon Musk suggested Lithium ion batteries “should be called Nickel-Graphite” batteries and referred to Lithium as “the salt on the salad”. The trend for Electric Vehicles and batteries is strong and supported by global commitments to significantly reduce hydrocarbon-based emissions; seventeen countries have so far committed to phase out internal combustion engine vehicles and increase the number of electric vehicles 3. This trend will increasingly drive the demand for Nickel batteries.

Price History

Nickel’s price has approximately doubled over the last 20 years, which has underperformed the S&P 500’s approx. 2.5x gain during the same period. Going forward expectations around the growth of EV and battery markets should be supportive of price action.

Properties

Nickel is a chemical element with the symbol Ni and atomic number 28. It is a silvery-white lustrous metal with a slight golden tinge that takes a high polish. Nickel is a transition metal and is hard yet ductile. It is somewhat denser, but has a slightly lower melting point, than iron. Pure, powdered nickel shows significant chemical activity, but larger pieces are slow to react with air under standard conditions because an oxide layer forms on the surface, preventing further corrosion (passivation). Therefore, nickel is generally considered to be corrosion-resistant. Nickel readily alloys with a number of other metals and is one of a few elements (together with iron, cobalt and gadolinium) that can form permanent magnets (i.e. are ferromagnetic) at room temperature.

Occurrence

Meteoric nickel is found naturally alloyed with iron in the form of kamacite and taenite - a reflection of the origin of those elements as major end-products of supernova explosions. An iron–nickel mixture is thought to compose the Earth's outer and inner cores, though this is technically inaccessible. 

Nickel is principally mined from two types of ore deposit: laterite and magmatic sulphide. According to the most recent US Geological Survey (January 2020), some 2.682m tonnes of nickel was mined in 2019. The principal producing countries were Indonesia (29.8%), the Philippines (15.7%), Russia (10.1%), New Caledonia (8.2%), Australia (6.7%) and Canada (6.7%). Leading nickel mining companies include Vale, Norilsk Nickel, Jinchuan Group, Glencore and BHP.

According to the World Gold Council, some 3533.7 tonnes of gold was mined in 2019. The principal producing countries were China (10.8%), Russia (9.3%), Australia (9.2%), the United States (5.7%), Canada 5.2%, Peru (4.1%), Ghana (4.0%) and South Africa (3.3%). Leading gold mining companies include Newmont, Barrick Gold, AngloGold Ashanti, Polyus Gold, Kinross Gold and Newcrest Mining.

History

Use of nickel (as a natural meteoric nickel–iron alloy) has been traced as far back as 3500 BCE. However, nickel was only isolated and classified as a chemical element in 1751 by a Swedish chemist, Axel Fredrik Cronstedt. Cronstedt initially mistook the nickel ore for a copper mineral that mysteriously resisted refinement. Originally called Kupfernickel by the German miners who had first found this strange rock, the element's name thus comes from a mischievous sprite of Germanic miner mythology, Nickel (with Kupfer being the German word for copper). 

Footnotes

1 - MSCI AC Equity and Global Aggregate
2 - “The Long Economic Hangover of Pandemics”, June 2020, Oscar Jorda, Sanjay Singh, Alan Taylor
3 - Theclimatecenter.org/actions-by-countries-phase-out-gas

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