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Carmakers face surged costs and supply issues as nickel prices double

Carmakers face surged costs and supply issues as nickel prices double

Auto manufacturers are facing higher costs and supply disruptions as the price of nickel surged to a record high following the invasion of Ukraine by Russia. Prices reached more than $100,000 per tonne, pushed further as buyers scrambling to cover short positions, as the London Metal Exchange (LME) suspended nickel trading for the day.

Nickel is an important element that is used in the making of EV batteries as well as stainless steel, with Russia supplying around 10% of the world’s total nickel supply.

Even though metal export has not been targeted by western sanctions, uncertainty over its future supply has driven up the costs of aluminum and palladium, which are used in the making of car parts and catalytic converters respectively.

LME, a major global commodity exchange, stated that the decision to halt trading of nickel was taken on orderly markets grounds as panic arose, adding that the suspension can last for up to several days.

The rise in commodity prices threatens to elevate EV prices amidst affordability issues for consumers, especially when their running costs are increasing steeply due to higher energy bills.

Mike Hawes, CEO of the Society of Motor Manufacturers and Traders, stated that Russia and Ukraine produce some of the crucial raw materials needed for the EU’s automotive supply chain, like palladium, aluminum, and nickel, used in battery manufacturing. 

A spokesperson from Volkswagen stated that the corporation had hedging contracts in place, which would provide it some protection from short-term surges in the prices of raw materials.

Nickel prices had already hit record levels at the start of this year, although only 15% of its current peak, with rising demand for EVs causing manufacturers to struggle for acquiring raw materials.

Tesla boss Elon Musk had warned last year of a potential scarcity in metals for EV production, stating that nickel was the biggest concern with regards to increasing production of lithium-ion cells.

The issue persists as manufacturers are already facing a shortage of semiconductors, with analysts warning that disrupting Ukraine’s automotive industry, which employs around 60,000 people and is a major parts supplier to German firms, can worsen the shortages.

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Sunil Jha

Sunil Jha has been a part of the content industry for close to two years. Having previously worked as a voice over artist and sportswriter, he now focuses on writing articles for, across a slew of topics, ranging from technology to trade and finance. With a business-oriented educational background, Sunil brings forth the expertise of deep-dive research and a strategic approach in his write ups.