Are ASX nickel shares worth investing in?

What role will the metal play in the world in the decades to come? And which stocks are the best for an investment?

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Lithium has been the headline star of battery minerals among ASX investors in recent years.

But with the stock prices of most of the producers now fully priced, what about some of the other ingredients necessary for a net-zero future?

Nickel is known to be one of those minerals. The importance of its role is reflected in how the nickel price has risen about 35% since July.

So should you invest in a nickel miner and, if so, which ASX shares are the best investments?

Shaw and Partners portfolio manager James Gerrish answered this very question this week.

A smiling woman holds an arm in the air in triumph while also holding a graphic of a fully-charged battery in her other hand representing the Pilbara Minerals share price

Image source: Getty Images

Future of nickel in batteries is under a cloud

Gerrish has one warning for investors considering buying nickel mining ASX shares.

"High energy lithium-ion batteries use nickel, cobalt and manganese, whereas LFP batteries use lithium iron phosphate, a non-toxic material, as the cathode material. That is, no nickel," he said in a Market Matters Q&A.

LFP is starting to eat into lithium-iron's market share. 

According to power systems manufacturer Cummins, LFP batteries are cheaper to produce and can be charged to 100% without degradation.

And, as Gerrish mentioned, LFP is safer due to the absence of toxic materials.

"With [LFP] gaining more traction of late, nickel has lost some of its lustre as an ESG investment making this no longer an area Market Matters wants to be aggressively long."

Which ASX nickel stock is best? IGO vs Mincor

But if he had to dip into the nickel industry, Gerrish was asked whether he would choose IGO Ltd (ASX: IGO) or Mincor Resources NL (ASX: MCR).

Mincor is a specialist nickel producer, whereas IGO extracts other minerals as well as nickel.

"We prefer IGO over Mincor in the nickel/lithium/EV space," said Gerrish.

"This is a rapidly evolving industry where we would like to stick with the proven names who are making a profit and paying a dividend."

The market conditions at the moment are not rewarding future potential for earnings growth, he added.

"Market Matters holds IGO in our flagship growth portfolio, but only with a relatively small 3% weighting."

The IGO share price has risen 23% in the past 12 months, whereas Mincor has dipped 32% over the same period.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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