Eramet, a bet on the continuation of the rebound in nickel prices

Tesla’s iconic boss Elon Musk recently voiced concerns about a possible shortage of nickel, a metal essential for making batteries for electric cars. Will we therefore witness a rush on “the devil’s metal?” Nickel prices have already been rising for several months. For the benefit of the French mining and metallurgical group. His return to better fortune is a gamble.

Will Tesla founder Elon Musk get out of the troubled Eramet rut? The iconic boss of the automaker had expressed this summer of his nickel supply problems and fears of a possible shortage. Nickel is one of the essential elements in the manufacture of batteries for electric cars. Although there are alternatives, it keeps the battery compact and light, and provides more battery life.

Elon Musk therefore appealed to the major mining groups for a solution, while specifying that it had to be respectful of the environment. It entered into negotiations this week with the world’s largest mining company, BHP. The problem raised by tesla should arise for other car manufacturers who have all embarked on electric mobility, and whose electric models are expected to replace traditional cars. Suddenly, the question arises as to whether we are heading for a “devil’s” metal rush or not. While it is obviously too early to tell, some experts estimate nickel demand to reach 1 million tonnes by 2030 compared to 100,000 today. But the offer will struggle to follow. It takes between 5 to 10 years to develop a deposit, and the extraction of nickel is far from being environmentally neutral, which should make it even more difficult to operate new projects in view of the tightening of regulations. worldwide.

A bet also on the democratization of the electric car

Nickel prices do not yet reflect this possible tension in the market, but they have been on an uptrend for several months. They are now trading around $ 14,680 a tonne compared to an average of $ 12,455 in the first half. These price levels should give Eramet a breath of fresh air, which is suffering the brunt of the crisis. All of the mining and metallurgical group’s markets are suffering, stainless steel for nickel, iron and steel for manganese, zircon for mineral sands, and finally aeronautics for its high performance alloys. However, nickel prices have a significant leverage effect on the group’s results. Any change of $ 1 in the nickel pound translates to an increase of 100 million euros in its gross operating surplus. Until the negotiations started by Tesla come to an end, and on the condition that the purchase price is revealed, which would constitute a strong marker, and that the use of electric cars is democratized, the prices will be increased in the coming weeks. come by the restart of China which represents nearly 60% of the stainless steel market. Knowing that at the same time, the ongoing recovery of the Chinese steel industry will also support manganese prices. Eramet, which has disappointed a lot in recent years, is a speculative bet. A bet on the ecological transition and its realization in the mobility sector. The title which took 20% in a week is starting to wake up.

Our advice: Eramet shares can be bought, at 24 euros, only on a speculative basis to play on the continuation of the rebound in nickel prices. First objective: 30 euros (Code: FR0000131757).


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