Western Areas Share Price Down — China Wreaking Havoc (ASX:WSA)

By ,

It has been a rough couple of months for the Western Areas Ltd [ASX:WSA] share price.

Since hitting a 52-week high of $3.10 in late January, the WSA share price has fallen by 34%.

But that doesn’t seem to have deterred investors, with shares rebounding at the beginning of trade today on the announcement of WSA’s latest share placement.

ASX WSA Share Price Chart - Western Areas Ltd SharesSource: TradingView


At the time of writing, however, the WSA share price has sunk slightly, down 0.49% to trade at $2.02 per share.

Despite the backing, it seems the decline on nickel prices has weighed heavily on WSA.

How to Capitalise on the Potential Commodity Boom in 2021. Learn More.

What’s happened?

The WSA share price rallied strongly from its trough in November, set off by an unfettered run-up in the price of nickel.

WSA’s December quarterly activities report sent the share price into a nosedive as the company announced output and nickel grades will continue to be impacted.

About half of those losses were quickly retraced.

One, because output was only being disrupted due to re-sequencing of the mine schedule.

And two, because of the re-sequencing WSA was forced to mine the lower-grade areas.

The latest share price crash has come from a more permanent macro-economic factor.

Nickel prices took a dive earlier this month when Chinese steelmaker Tsingshan essentially announced it could turn lower-grade nickel into the high-grade stuff needed for batteries.

Discover three bullish signs that could make nickel and copper stocks great investments in 2021. Download your free report now.

Nickel is split into class 1 and class 2.

Class 1 is higher purity and is the kind needed by lithium-ion battery manufacturers. It’s also the only class allowed to be traded on the London Metal Exchange.

Class 2 is mostly used to make stainless steel.

In developing this new process, Tsingshan has effectively increased the supply of battery-quality nickel to the market.

What does this mean for Western Areas Share Price?

The nickel price is expected to rebound quickly, with BMO Capital Markets saying the price drop was a buying opportunity given the underlying strength in nickel demand.

But for WSA, it could leave some scarring.

Its Flying Fox mine is one of the highest-grade nickel mines in the world.

And with class 2 nickel now able to essentially be converted into class 1, the price gap between the two could be removed.

However, there is a big cost factor involved in the process.

Converting class 2 to battery-grade nickel could increase the cost and carbon footprint compared to the class 1 supply.

So, while this ‘breakthrough’ may alleviate supply concerns, the price of nickel could easily recover.

There’s also an ethical factor to consider. With companies like Tesla seeking environmentally friendly (or at least less damaging) ways to source materials for their batteries, Tsingshan’s product may not be attractive to potential buyers.

WSA’s recent share price action highlights just how much the world is paying attention to ‘renewable energy-critical’ minerals. In our latest commodities report, we show you how you could profit from the imminent commodity boom. Discover why copper and nickel stocks are primed for a resurgence in 2021, and how best to capitalise. Click here to learn more.


Lachlann Tierney,

For Money Morning

About Lachlann Tierney

Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest…

Weekly ASX Market Wrap — WSA and SAR Top Movers Last Week

The previous week saw the ASX All Ordinaries [XAO] close at 6,011 points. The opening three days of the week saw trading move sideways before a drop on Thursday. Friday was a wild day of trading, with [XAO] eventually…

ASX Nickel Share Price Surge on Indonesian Export Ban Headlines

At time of writing, the share prices of ASX-listed nickel stocks like Independence Group NL [ASX:IGO] and Western Areas Ltd [ASX:WSA] are surging on news that Indonesia will move to ban nickel ore exports by the end of December.