Trudeau resignation a result of ‘political infighting’

Trudeau’s decision to step down comes amid mounting pressure from within his party and declining public approval ahead of a Canadian federal election, which will be held later this year.

‘This country deserves a real choice in the next election, and it has become clear to me that if I’m having to fight internal battles, I cannot be the best option in that election,’ he said during a press conference on Monday.

Trudeau confirmed that he will remain in office until the Liberal Party selects a new leader. Parliament will be suspended until March 24, pending the leadership transition.

The news places Canada’s political landscape in limbo. While some analysts view the prospect of a Conservative-led government as a catalyst for more business-friendly policies, others see the interim period as a source of risk.

‘The (expected) change in government could usher in a policy agenda that stimulates economic growth,’ Ian Chong, portfolio manager at First Avenue Investment Counsel, told Reuters.

Sachit Mehra, president of the Liberal Party, confirmed that the party’s board of directors will convene this week to outline the leadership selection process. ‘Liberals across the country are immensely grateful to Justin Trudeau for more than a decade of leadership to our Party and the country,” he said in a statement.

Trudeau was elected to head the party in 2013 and won the role of prime minister in 2015. His leadership has spanned nine years, during which his government prioritized climate policy, social programs and pandemic response measures.

Nickel price in Q4

Nickel reached its 2024 peak of US$21,615 per metric ton on May 20, but was back below the US$16,000 mark by the end of July. Following some volatility in August and September, the price of nickel gained momentum at the end of Q3, reaching US$18,221 on October 2.

However, the increased prices were not to last, and nickel spent much of the final quarter in a downward trend.

By the end of October, the price had fallen to US$15,732 before climbing back to US$16,607 on November 7.

Since then, the nickel market has seen some volatility but has continued its downward trend. On December 19, it slumped to its 2024 low of US$15,090. However, it saw some small gains, ending the year at US$15,300 on December 31.

Nickel price, Q4 2024.

Chart via Trading Economics.

Nickel’s weak prices are largely due to high output from Indonesia and low demand, particularly from Asian markets, as China’s recovery has failed to gain traction.

As a result, on December 19, it was reported that Indonesia is considering implementing cuts to mining quotas to boost prices. The move would see the country cut output by nearly half, from 272 million metric tons of ore produced in 2024 to 150 million metric tons in 2025.

Additionally, Indonesia is looking to tighten environmental regulation compliance for miners in the new year and could introduce increased volatility into metals markets, including nickel. The move comes not long after it signed several new agreements in November with Chinese companies that would see billions invested in nickel operations in Indonesia.

Indonesia had previously worked to distance itself from China’s partnerships as it sought to improve relations with the United States and be included under the US Inflation Reduction Act (IRA).

The new agreements emerged shortly after Donald Trump won the US presidential election on November 7. Trump’s return to the Oval Office is unlikely to bode well for Indonesian officials seeking to secure a trade deal with the United States. However, a loosening of rules in the IRA might create new inroads for Indonesian nickel producers.

How did nickel perform for the rest of the year?

Nickel price in Q1

The story since the start of the year has been high output from Indonesian operations.

Low prices saw some nickel producers, including First Quantum Minerals (TSX:FM,OTC Pink:FQVLF) and Australia’s Wyloo Metals, cut production. However, New Caledonia was most affected. The country is more dependent on the nickel sector, with industry giants like Glencore (LSE:GLEN,OTC Pink:GLCNF), Eramet (EPA:ERA) and raw materials trader Trafigura owning significant stakes in nickel producers in the country.

Ultimately, cuts there led to a 200 million euro bailout package from the French government, which exacerbated tensions over New Caledonia’s independence from France. Opponents of the agreement argued it risks the territory’s sovereignty and that the mining companies aren’t contributing enough to bail out the mines, which employ thousands.

Nickel price in Q2

The second quarter was defined by a surge in nickel prices.

Positive momentum began to work its way into the market at the end of Q1, as Indonesia experienced delays in approving mining output quotas and speculation grew that Russian nickel could be sanctioned by the US and UK.

On April 12, news broke that Washington and London had banned US and UK metal exchanges from admitting new aluminum, copper and nickel from Russia. Taking immediate effect, the prohibitions also halted the import of those metals causing the price to soar to a year-to-date high of US$21,615 on May 20.

At the time Joe Mazumdar, editor of Exploration Insights, suggested this move would have little impact on the sector.

Ultimately, by the end of the quarter, the price was trending toward US$17,000.

Nickel price in Q3

Nickel saw a strong end to the third quarter with the price rising above the US$18,000 mark.

Nickel found pricing support in September as the Chinese government introduced a raft of stimulus measures intended to boost economic growth in the country. Among the measures were a 0.5 percent interest rate cut on existing mortgages and a reduction in the downpayment required to purchase a home to 15 percent from 25 percent.

The announcement came alongside cuts at Chinese smelters as they were forced to deal with a shortage in feeder supply due to more delays to Indonesia’s permitting and quota system.

Investor takeaway

The nickel market is expected to remain oversupplied for some time.

With China’s economy on a slow path to recovery, demand will remain weak. Meanwhile, supply will likely hinge on if Indonesia chooses to make significant cuts to supply output.

While demand for nickel in electric vehicle batteries is expected to be up 27 percent year-on-year in 2024, producers have also been looking to alternatives that don’t require as much nickel. Additionally, more consumers are looking to plug-in hybrid vehicles with smaller batteries that require less nickel.

Even with the increased demand from the battery sector, nickel is primarily used in stainless steel products, which are still dominated by the Chinese manufacturing and real estate sectors.

Perhaps the most significant factors to consider are political. A new administration in the United States and a shift in the IRA’s approach to sourcing critical metals like nickel could alter the landscape for nickel producers in 2025.

Lithium supply and demand trends in Q3

Market oversupply, subdued spot market activity and a shift in preferred battery chemistries emerged as the most prevalent trends impacting the lithium market between July and the end of September.

“Q3 has been a quiet quarter on the spot market. The majority of demand from midstream consumers of lithium chemicals was satisfied by volumes delivered under contract,” Jang commented. “Cathode producers secured limited extra material on the spot market, adjusting this according to their demand.”

Prices also faced headwinds from a supply imbalance. “Inventories of chemicals in China remained high, which did not support prices. Several lithium producers, especially those higher up the cost curve that were producing from hard rock, reduced or stopped production due to the deteriorating price environment,” she added.

On the battery side, the once-dominant NCM chemistry lost some of its market share to the lithium-rich LFP design.

“LFP demand growth proved stronger than NCM, resulting in increased LFP production, with some cathode producers undertaking the approximately nine month process of switching a portion of their capacity from NCM to LFP,” said Jang.

EV sales climb as market recovers

Although US EV sales figures for 2024 have come in below projections, the broader EV sector made large gains in September when global sales tallies topped 1.7 million units, setting a new monthly record.

According to data from Rho Motion, the banner month for EV sales represents a 22 percent year-to-date increase. Regionally, the Chinese market saw the most significant increase, with 1.1 million new EVs sold.

“This record-breaking month of EV sales brings new hope to the industry,” said Charles Lester, data manager at Rho Motion, in a mid-October article. He went on to note, “While the electrification of transport seems inevitable, the recent slowdown of sales in many parts of the world has sewn seeds of doubt which can now start to be swept aside. However, the regional disparities are astonishing, with China alone accounting for well over half the global total, meanwhile Europe’s numbers are shrinking, and the US and Canada are steadily growing.”

Another end-use segment that saw demand growth in Q3 was the energy storage system (ESS) sector. Jang noted that it grew steadily even as downstream EV sales growth continued to vary widely between different regions.

‘We saw this particularly in North America, where it triggered ESS market participants to secure carbonate ahead of the presidential election in November, fearing tariff increases following either election result,” she said.

Tariffs incentivizing North American EV production

As the third largest producer of lithium and the leader in battery and EV manufacturing, China’s dominance in these markets has led the US, EU and Canada to implement steep tariffs on Chinese EVs.

Most recently, Canada levied a 100 percent tariff on EV imports from the country, citing “unfair” trade policies. China responded quickly by filing a complaint with the World Trade Organization over the 100 percent EV tariffs, as well as Canada’s 25 percent tariffs on aluminum and steel products from the Asian nation.

Although the EV tariffs are meant to protect Canadian automakers and the sector, they do little to address the nation’s supremacy in battery manufacturing, nor do they incentivize regional lithium production.

“Tariffs on raw material imports are likely to be more impactful in spurring regional lithium production than tariffs on EV imports. But domestic automakers tend not to be too fond of this as it raises their cost of production. Domestic automakers are more interested in EV import tariffs of course, but the impact of this on regional lithium production is less direct,’ noted Adam Megginson, an analyst at Benchmark Mineral Intelligence

In the US, tariffs on Chinese lithium-ion batteries for EVs are set to jump from 7.5 percent to 25 percent in 2025, while tariffs on EV imports will climb to 100 percent. However, even as the Biden administration hikes taxes on Chinese EVs, it is offering help to the domestic auto sector.

“We have seen strong funding support at the federal level, with a second round of grants from the US Department of Energy unveiled targeted at battery raw materials projects,” said Megginson.

The analyst went on to note that SWA Lithium, a joint venture company owned by Canada’s Standard Lithium (TSXV:SLI,NYSEAMERICAN:SLI) and Norwegian energy company Equinor (NYSE:EQNR), received a US$225 million grant from the US for the construction of Phase 1 of the South West Arkansas project.

The Department of Energy’s Office of Manufacturing and Energy Supply Chains, which oversees the funding, also awarded a grant to another US-based company. “American lithium project developer TerraVolta was selected by the (Department of Energy) to receive a US$225 million grant for its Liberty Owl project, located in Texarkana, Texas. TerraVolta plans to commence construction in 2028, with production the following year,” said Megginson.

Lithium projects in the pipeline

Although the lithium market remained depressed and well supplied during the third quarter, Benchmark Mineral Intelligence is forecasting a supply shortage starting as early as 2025.

While there are currently 101 lithium mines globally, future supply may struggle to meet growing demand, particularly with China expected to drive a 20 percent annual increase over the next decade.

Low lithium prices have already led to reduced project investments and capital expenditures. However, as Jang pointed out, several significant investments in future supply were made during the third quarter.

“In July 2024, European Lithium (ASX:EUR,OTCQB:EUEMF) and Obeikan Group signed a 50/50 joint venture agreement to jointly develop the construction and operation of a lithium hydroxide facility in Saudi Arabia,” she said.

The Benchmark Mineral Intelligence analyst also noted that the EU signed a framework agreement on critical raw materials supply with the Republic of Serbia in July.

Of course, there were also challenges in the quarter. July saw Rio Tinto’s(ASX:RIO,NYSE:RIO,LSE:RIO) plans to advance the Jadar lithium project in Serbia met with opposition. Protestors were demanding that the country’s government revoke permission for the proposed mine and implement a lithium-mining ban.

An October 7 parliamentary vote in Serbia failed to enact such a ban.

Jang also outlined other notable development news from the quarter, including Ganfeng Lithium’s (OTC Pink:GENF,SZSE:002460,HKEX:1772) August investment in Lithium Argentina’s (TSXV:LIT,OTCQX:LILIF,FSE:OAY3) Pastos Grandes lithium brine project in Salta, Argentina, marking a significant expansion in its South American operations.

Also in August, E3 Lithium (TSXV:ETL,OTCQX:EEMMF) entered a joint development agreement with Pure Lithium to explore the design of a lithium metal anode and battery pilot plant in Alberta, Canada.

“In September 2024, Ganfeng Lithium announced a RMB 500 million (US$70.5 million) investment to boost cathode production at its mica mine and processing project in Inner Mongolia,” she said.

“Additionally, SQM Australia (NYSE:SQM) partnered with Andrada Mining (LSE:ATM,OTCQB:ATMTF) in September to jointly develop the Lithium Ridge asset in Namibia.”

Continuing this trend, Rio Tinto announced plans to spend US$6.7 billion to acquire US-based Arcadium Lithium (NYSE:ALTM,ASX:LTM) in early October.

Lithium trends to watch as 2024 continues

If the lithium market has indeed bottomed, there may be opportunities for those with the right risk appetite.

According to a late July report from Sprott, while the long-term outlook for lithium miners remains positive due to rising demand, many producers have experienced significant share price drops throughout 2024.

The firm believes that given lithium’s demand outlook, these stocks could be well positioned for future growth. For investors, this could mean a chance to invest in lithium miners at lower prices compared to 2023.

On a different note, Megginson encouraged investors to watch the US election moving forward.

‘All eyes will be on the US election to see whether a Trump presidency brings about significant structural changes to the (Inflation Reduction Act), or a Harris presidency strengthens this policy support picture,’ he said.

‘We typically expect demand for lithium chemicals to be highest heading into Q4, as it tends to be the strongest quarter for EV sales. Given that feedstock supply upstream remains fairly strong, and chemicals supply in the midstream remains robust, we may not see much movement in prices to the end of the year,’ added Megginson.

Looking ahead to 2025, the analyst said he expects to see more market consolidation if prices remain rangebound. This could also lead to companies looking for merger and acquisition opportunities.

“In 2025, it will be interesting to see which projects are forced to pause or halt production due to the price level challenging their economics,” he said. “Lastly, we will be watching lithium project developments in Africa closely, as several companies are actively developing capacity in the continent, particularly in Zimbabwe and Namibia.’

Megginson added, “Should this new hard-rock supply come online, and at a sufficient grade quality and consistency, it could pose a challenge to incumbent producers who sit higher up on the cost curve.”