Happy Nice Mall

The Russian invasion of Ukraine has shaken the global nickel market as the metal gains importance as a component in electric car batteries, raising fears that higher prices could slow nickel production. moving away from fossil fuels.

The price of nickel doubled in one day last week, causing the London Metal Exchange to freeze trade and virtually bring the global nickel market to a standstill. two years later supply chain chaos This episode, caused by the pandemic, provides further evidence of how geopolitical tensions are destroying business relationships that companies once considered natural and forcing them to rethink where to buy them. parts and the metals they use to make cars and many other products.

Automakers and other companies that needed nickel and other battery raw materials such as lithium or cobalt began looking for ways to protect themselves against future shocks.

Volkswagen, for example, has started buying nickel directly from mining companies, Markus Duesmann, CEO of the automaker’s Audi division, said in an interview Thursday. “Raw materials will be an issue in the years to come,” he said.

The prospect of prolonged geopolitical tensions is likely to accelerate US and European attempts to develop domestic supplies of goods, which often come from Russia. For example, there are nickel deposits in Canada, Greenland and even Minnesota.

“Nickel, cobalt, platinum, palladium, even copper — we’ve already realized we need these metals for the green transition, to mitigate climate change,” said Bo Stensgaard, CEO of Bluejay Mining. Western Greenland He made a venture with KoBold Metals, whose backers include Jeff Bezos and Bill Gates. “When you see the geopolitical developments with Ukraine and Russia, it is even more clear that there are supply risks in these metals.”

However, due to the time required to obtain permits and financing, it will likely take years or even decades for new mining operations to be established. Meanwhile, companies using nickel, a group that includes steelmakers, will have to contend with higher prices that will eventually be felt by consumers.

An average electric car battery contains about 80 pounds of nickel. According to forecasts from trading firm Cantor Fitzgerald, a rise in prices in March will more than double the cost of this nickel to $1,750 per car.

Russia accounts for a relatively small portion of the world’s nickel production, and most of it is used to make stainless steel, not car batteries. But Russia plays a huge role in nickel markets. Norilsk Nickel, also known as Nornickel, is the world’s largest nickel producer with extensive operations in Siberia. its owner, Vladimir Potaninis one of the richest people in Russia. Norilsk is among a limited number of companies authorized to sell a special form of nickel on the London Metal Exchange, which handles the entire nickel trade.

Unlike other oligarchs, Mr. Potanin was not the target of sanctions and the US and Europe did not try to curb nickel exports, a step that would harm their own economies as well as Russia. The prospect of Russian nickel being cut off from world markets was enough to cause panic.

Analysts expect prices to decline from their recent highs, but remain much higher than they were a year ago. “The trend will be to go down to a level close to where we last left off,” said Adrian Gardner, principal analyst specializing in nickel at Wood Mackenzie. company.

Nickel was in bad shape even before the Russian invasion, as hedge funds and other investors were betting on rising demand for electric vehicles. The price has exceeded $20,000 per ton this year after hovering between $10,000 and $15,000 per ton for most of the last five years. At the same time, less nickel was being produced due to the pandemic.

After Russia invaded Ukraine in late February, the price soared to over $30,000 in a little over a week. Then came March 8. News spread on the trading desks of brokerage houses and hedge funds in London that a company that turned out to be China’s Tsingshan Holding Group made a big bet that the nickel price would fall. When the price rose, Tsingshan had billions of dollars in debt, a condition known on Wall Street as a short-term squeeze.

The price climbed to just over $100,000 a tonne, threatening the existence of many other companies making false bets and causing the London Metal Exchange to cease trading.

The exchange tried to restart nickel trading twice this week with the new price limits, but the sudden dips caused trading to stall once again. “The market has broken down,” said Keith Wildie, chief commercial officer at London-based metals firm Romco.

There are no signs that nickel prices will lead to plant closures, as a shortage of parts produced in Ukraine has brought assembly lines at Volkswagen, BMW and other automakers to a standstill. It will take several weeks for price increases to fluctuate through the system.

For now, other large nickel buyers, such as automakers and steelmakers, can find alternative suppliers, use more recycled materials, or switch to battery designs that require less nickel.

“There’s enough nickel,” said Ola Källenius, CEO of Mercedes-Benz, in an interview this week. “It’s unlikely that there will be any secondary effects from this conflict,” he said, noting that automakers may have to pay more, however.

Audi’s Mr Duesmann said the Ukraine conflict underlined the urgency of moving away from fossil fuels. Russian oil plays a much larger role in the global economy than Russian nickel. It would be too narrow-minded to say ‘Electromobility does not work’.

Beyond the sudden interruption in supply, automakers are worried about a pullback from open markets that are so good for business. Katrin Kamin, a trade expert at the Kiel Institute for the World Economy in Germany, noted that global trade is in pretty good shape during the pandemic.

“Maybe we should talk less because globalization is in crisis and international relations are at a low point,” Ms Kamin said in an email.

But the Ukraine conflict is “a major blow to trade,” he added.

Ana Swanson contributing reporting.