Russia’s invasion of Ukraine has shaken the global nickel market, as the importance of the metal in electric car batteries has diminished, raising fears that higher prices could slow the transition away from fossil fuels.
The price of nickel doubled in a single day last week, causing the London Metal Exchange to stabilize trading and effectively stabilize the global nickel market. After two years of supply chain chaos caused by the epidemic, the episode provided further evidence of how geopolitical tensions are destroying trading ties that companies once acknowledged, forcing them to reconsider where the parts and metals used to make cars come from. Fell. Other products.
Automakers and other companies that need nickel, as well as other battery raw materials such as lithium or cobalt, have begun to look for ways to protect themselves against future shocks.
Volkswagen, for example, has begun exploring buying nickel directly from mining companies, Marcus Dusman, chief executive of carmaker Audi, said in an interview Thursday. “The problem of raw materials will remain for years to come,” he said.
The prospect of prolonged geopolitical tensions is likely to accelerate efforts by the United States and Europe to develop a domestic supply of commodities, frequently coming from Russia. There are nickel deposits, for example, in Canada, Greenland and even Minnesota.
“Nickel, cobalt, platinum, palladium, even copper – we’ve already realized that we need those metals for green transition to mitigate climate change,” said Bo Stansgaard, chief executive of Blues Mining. has been doing. Western Greenland in a venture with Cobold Metals, whose supporters include Jeff Bezos and Bill Gates. “When you look at the geopolitical developments with Ukraine and Russia, it is more clear that there are supply risks with these metals.”
But setting up a new mining operation can take years, even decades, as it takes time to get permits and financing. Meanwhile, companies using nickel – a group that includes steel producers – will have to contend with higher prices, which will eventually be felt by consumers.
The average electric car battery has about 80 pounds of nickel. Trading firm Canter Fitzgerald estimates that the March price increase will more than double the price of nickel to $ 1,750 per car.
Russia has a relatively small share in world nickel production and is used to make stainless steel, not car batteries. But Russia plays an outside role in the nickel markets. Norilsk Nickel, also known as Nornical, is the world’s largest producer of nickel with a large operation in Siberia. Its owner, Vladimir Putin, is one of the richest men in Russia. Norilsk is one of only a limited number of companies authorized to sell a specific form of nickel on the London Metal Exchange, which manages all nickel trading.
Unlike other alligars, Mr. Putin is not the target of sanctions, and the United States and Europe have not tried to block nickel exports, a move that would hurt their economies as well as Russia. The prospect of Russian nickel being cut off from world markets was enough to spread panic.
Analysts expect prices to come down from their recent peaks but will be much higher than a year ago. “This trend will have to come closer to where we last left off,” said Adrian Gardner, a chief analyst specializing in nickel at Wood Mackenzie, “about $ 25,000 per metric ton compared to a peak of $ 100,000 per ton.” Firm
Nickel broke even before the Russian invasion as hedge funds and other investors staked on growing demand for electric vehicles. The price peaked at $ 20,000 per tonne this year after hovering between $ 10,000 and $ 15,000 per tonne for most of the last five years. At the same time, nickel production was declining due to the epidemic.
After Russia invaded Ukraine in late February, the price jumped to more than 30,000 in just over a week. Then came March 8th. Word spread on the trading desks of brokerage firms and hedge funds in London that a company called Tingshan Holding Group of China had made a big bet that nickel prices would fall. When the price went up, Singshan owed billions of dollars, a situation known as a short squeeze on Wall Street.
The price rose slightly above $ 100,000 a tonne, jeopardizing the survival of many other companies that had made false bets and encouraged the London Metal Exchange to suspend trading.
Russia-Ukraine war and global economy
The exchange had twice this week tried to resume trading in nickel with a new price limit, but trading was halted once again due to a sudden decline. “The market is down,” said Keith Wilde, head of trading at Romco, a London-based metals firm.
There is no indication that nickel prices will lead to a factory shutdown, as assembly lines from Volkswagen, BMW and other carmakers have been suspended due to a shortage of components made in Ukraine. It will take a few weeks for the price to rise through the system.
For now, other large nickel buyers, such as automakers and steel makers, will be able to find alternative suppliers, use more recycled materials, or switch to battery designs that require less nickel.
“There’s enough nickel,” Ola Calenius, chief executive of Mercedes-Benz, said in an interview this week. But carmakers may have to pay more, he said, adding that “it is unlikely that this conflict will have any secondary effects on us.”
The Ukraine conflict has emphasized the urgency to move away from fossil fuels, Mr. Said Audi’s Dusman. Russian oil plays a much bigger role in the global economy than Russian nickel. “Electromobility doesn’t work,” he said.
In addition to the immediate disruption in supply, automakers are concerned about retreats from open markets that are good for business. Katherine Kamin, a trade specialist at the Kill Institute for the World Economy in Germany, noted that global trade was doing well during the epidemic.
“Perhaps we should talk less about globalization in a crisis and more about the low level of international relations,” she said. Kamin said in an email.
But the Ukraine conflict, she added, “is a big blow to trade.”
Ana Swanson Contribution Report.