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Rising Nickel Prices Could Threaten The EV Plans!
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- EV goals may be hampered by rising nickel prices.
- A squeezing miner might provide a solution to the supply shortage.
The global quest by manufacturers to extend their electric car portfolios has just gotten a lot more expensive.
Soaring nickel costs are threatening to stymie the auto industry’s EV goals, with the crucial battery metal caught up in supply concerns and a supply shortage that has brought prices to all-time highs. While economists predict that prices would fall from their present astronomical heights, the bad news is that they might remain high, costing hundreds of dollars.
The electric vehicle sector was already scurrying to procure battery metals in anticipation of a surge in demand. Elon Musk, the CEO of Tesla, has made the structural nickel deficiency one of his major worries in recent years. The price increase means automakers will have to redouble their efforts to find substitutes or alternative sources, one of which could come from Tsingshan Holding Group Co., the Chinese mining behemoth at the center of the nickel shortage, which introduced a low-grade ore battery nickel production method last year.
For the time being, purchasers are dealing with a lot of pricing uncertainty. After trading was halted on Tuesday due to the price spike, the London Metal Exchange said it did not anticipate the nickel market to resume until March 11.
While nickel prices have been rising for weeks due to concerns about supply disruption from an important supplier, Russia, this week’s price increase was sparked by holders of short positions, notably Tsingshan, rushing to close them out.
In only two days, prices soared by 250 percent to gold than $100,000 a ton. The LME announced on Tuesday that trades that occurred during Asian hours prior to the suspension will be canceled. A 100-kilowatt-hour battery would cost nearly $3,100 at Monday’s closing price of $48,000, which is more than quadruple the average cost last year. When the dust settles, researchers predict that nickel prices will stay high this year, costing carmakers hundreds of dollars more for each vehicle.
“Nickel can be a volatile beast,” said William Adams of Fastmarkets in London, who heads up base metal and battery research.
Here’s how it works in math. A 100-kilowatt-hour battery requires around 145 pounds of nickel. According to Adams, the average price per metric ton was over $18,500 last year. Every battery contains around $1,200 worth of nickel. That same battery would require more than $1,900 in nickel at $29,000 a metric ton, where it closed Friday before the worst of the short squeeze. It’s not a large increase, but carmakers don’t like it when the cost of a single component rises by $700 per vehicle.
Carmakers may lock up long-term supply contracts and prevent price spikes in the spot market for a time, but they will pay more if higher pricing persists.
New supplies are opening up in Indonesia, and Russian nickel will make its way to China and other countries that aren’t subject to sanctions or boycotts, but Adams expects prices to stay high this year. This year, he anticipates the metal to sell between $20,000 and $25,000 per ton, with an average of roughly $22,000. He has not changed his prognosis.
This will put downward pressure on margins in an already profit-constrained sector of the industry, causing automakers to accelerate their shift to other metals.
Tsingshan, the world’s largest nickel miner, began delivering its first consignment of nickel matte last year. It’s a new method of producing nickel for batteries that experts like BNEF’s Allan Ray Restauro and Kwasi Ampofo believe might open up a large supply path for electric vehicles from low-grade ore sources.
While capacity is still restricted, Tsingshan said in January that it had exported its first batch of nickel matte for electric-car batteries from its Indonesia factory, which has three manufacturing lines with a monthly capacity of 3,000 tons.
According to BNEF’s Restauro, if more nickel-pig-iron producers adopt the new technique, the supply of battery-grade nickel would undoubtedly increase.
Restauro anticipates the transition from nickel pig iron to nickel matte to quicken, albeit this will necessitate higher nickel prices in the medium to long term since this will necessitate greater investments to convert current furnaces.