Increasing Nickel Prices Worsen EV Supply Chain Woes

The dramatic increase in nickel prices is raising concerns of electric car makers. Last week, the price of nickel increased by almost 250% to about $100,000 per ton, and as a result the London Metal Exchange halted trading of the base metal for that entire day.

Electric vehicle (“EV”) producers are dealing with mineral supply chain disruptions leading them to struggle to maintain sustainable production costs.  Now with the war in Ukraine, Russia is facing sanctions that have included the U.S. ban of oil and gas imports. In retaliation, Russia banned exports of more than 200 products. As a result of these economic penalties, Russian commodities are experiencing a sudden surge in prices. However, nickel and other metals have not been targeted by such sanctions.

Nickel is an important mineral used in manufacturing the lithium batteries that are used in electric vehicles. Russia is the world’s third-largest supplier of the metal behind Indonesia and the Philippines accounting for 17% global production. With the increase in the cost of the metal, carmakers might soon need to factor in an additional $1,000 into their production costs.

The price volatility is a pain that most carmakers have to come to terms with. According to Simon Moores, CEO of Benchmark Mineral Intelligence, carmakers have no other option other than to accept the prices unless they have long-term supply agreements. European carmakers will be greatly affected by the rise, with Moore stating that they are the most reliant on Russian nickel.

In January, EV producer Tesla shortened the supply chain and signed a deal with Talon Metals from Minnesota to receive a supply of nickel. The project plans to be carbon neutral by using technology to trap carbon dioxide from the atmosphere into rocks.  Meanwhile, other U.S. carmakers are looking to future-proof their battery technology from supply chain disruptions.

Between 2010 and last year, the price of battery packs dropped by nearly 90%. However, Bloomberg NEF predicts that the price will rise due to the supply chain issues and the current war in Ukraine. Stakeholders in the EV industry have stated that carmakers tend to have long-term contracts with battery makers that increase the price when cost of raw materials rises. Meanwhile, other metals including zinc, aluminum, copper and lead are experiencing modest bumps.

Despite fears of rising production costs, owning an electric vehicle seems to be beneficial as the drivers do not have to deal with the expensive cost of gas. Nevertheless, EV makers such as ElectraMeccanica Vehicles Corp. Ltd. (NASDAQ: SOLO) are likely looking for ways to cut costs so that motorists don’t find it prohibitive to acquire an electric vehicle.

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