Nickel followers and the London Metals Exchange (LME) were not the only ones to be badly affected by the battery metal’s recent dramatic price movements.
When nickel stormed above the US$100,000 mark on 8 March 2022, it not only forced the LME to suspend trading in the metal, it also instantly raised concerns in the global electric vehicle (EV) and battery metals markets.
Adding further fuel to the fire, March’s unprecedented nickel price hikes followed on from nickel prices reaching decade highs prior to the Russian invasion of Ukraine.
A number of leading analysts have linked the surging prices with a risk to nickel’s future as a battery metal.
In a nickel market which was already facing supply concerns because of a major surge in EV and stainless steel demand, global sanctions against Russia – which supplies around 10% of global nickel production – led to a significant flow-on effect into other areas.
Some EV and battery metal market specialists estimated the recent nickel price surge could add as much as US$1,000 to production of an EV.
Analysis from multinational investment bank and financial services company, Morgan Stanley, noted that the dramatic rise in nickel prices could spell major trouble for automakers.
Morgan Stanley auto analyst Adam Jonas has suggested that nickel’s record breaking price hikes should be calculated into forecasts for automakers’ earnings and may affect EV sales penetration over the next few years
Meanwhile, data analytics and consulting company, Global Data Plc, reported that Twitter influencers conversations around nickel’s relationship with EVs increased by more than 300% during the second week of March.
Many of those influencers suggested that the surging nickel prices will further disrupt the EV supply chain.
Global Data said the recent rise in nickel prices on widening fears of supply shortage from Russia has pushed EV makers into panic.
“The influencers expect any further disruption in supply chain may push the EV prices higher and may affect automakers’ plans to make low-cost EVs,” Smitarani Tripathy, a social media analyst at GlobalData, said.
The most popular tweets on the nickel issue captured by GlobalData’s Social Media Analytics Platform included: Livio Filice, director of sales, Duracell Power Centre+: “#Russia is the 3rd largest producer of #Nickel, a key energy metal used in #NMC battery modules. Significant blow to an ever changing supply chain. #UkraineRussianWar #EV #EnergyStorage.”
Jessica Amir, Australian market strategist at Saxo Bank: “Nailed Nickel’s Nail biting short-squeeze story @daniburgz. A Nonsensical Nickel rally seeing #EV producer’s stocks Nervously head into Negative Neighbourhood, as EV car makers will be forced to pay Nauseatingly high Nickel prices #nickel.”
Steve Hanke, economist at Johns Hopkins University: “#EconWatch: #Nickel is witnessing massive price increases as demand spikes and supply worries continue. Russia is big exporter of Nickel. Sanctions could disrupt that supply and send prices soaring. The EV industry will be hit especially hard, as Ni is a component of batteries.”
Brian Sullivan, anchor & global CNBC storyteller: “Nickel prices go insane. If prices stay high, really bad for steelmaking and EV and other battery makers. Trading halted for first time since Rutherford B. Hayes was president.”
Arjun Kharpal, Senior Correspondent at CNBC: “Nickel is a key part of electric vehicle batteries. Battery-pack prices dropped in 2021, but the rising price of Nickel and other key materials could push those prices high. Battery makers could hike prices and that could potentially filter through to price hikes from EV makers.”
Global market insights specialist, Fitch Solutions, added its voice to the growing concerns that surging nickel prices pose a risk to automakers’ EV ambitions.
Fitch’s Metals and Mining Team expect that the price of nickel will remain elevated for the remainder of 2022 due to the ongoing Russia-Ukraine conflict as Russian supply is rejected by buyers in the global market.
“Countries that have little to no EV purchase support (such as subsidies) will be vulnerable to further increases in already higher purchase costs of EVs relative to internal combustion engine (ICE) powered vehicles,” a Fitch report suggested.
“We also expect to see a surge of interest in alternative battery chemistries that exclude nickel, namely the lithium-iron-phosphate (LFP) chemistry.”
EV developers are now reported to be re-adjusting their supply positions almost on the run
Pre-Russia-Ukraine crisis concerns
Morgan Stanley had already predicted a nickel shortfall by 2026 – prior to the Russian invasion of the Ukraine. Similar market concerns were raised by global information provider IHS Markit, also prior to the Russian-Ukraine conflict.
In a recent white paper, IHS Markit predicted that surging raw material prices would put further EV battery price declines on hold until 2024. That analysis predicted that average 2022 EV battery prices will be 5% higher than in 2021, mostly due to increased auto-industry demand for LFP batteries.
UBS analysts had estimated that EV sales in leading markets, such as China, Europe and the U.S., saw a rise of around 130% on the year to over 3M units in 2021.
The investment bank recently upgraded its EV forecasts for China and expects global EV sales to increase by 60% year on year to around 4M units in 2022.
“Batteries accounted for about 10% of nickel demand in 2021 but the sustained rate of rapid demand growth means EVs are already delivering transformational nickel demand growth.”
S&P Global recently reported there has been a lack of significant nickel sulphide ore discoveries over the last decade and a similar shortage of new nickel sulphide projects planned in the medium term.
Nickel sulphide deposits account for the smallest portion of the world’s nickel assets even though it contains very high purity that is befitting for battery-grade nickel sulphate – and S&P Global noted that a significant portion of the known sulphide projects are already operational.
“Discovering fresh nickel sulphate supply is a pressing issue that battery makers, precursor producers and OEMs are scrambling to resolve,” the company noted.
EV developers are now reported to be re-adjusting their supply positions almost on the run. There are reports that nickel users are trying to shield themselves from future shocks. Volkswagen, for example, is reportedly considering buying directly from mining companies.
Others have been investigating alternative EV battery designs and battery metal options. What is clear is that the long-term effect of the March 2022 nickel market chaos still has a way to run.
