Nickel Prices Surge After Russian Sanctions... Direct Hit to Electric Vehicle Batteries

Western Sanctions on Russia Cause Nickel Prices to Surge
Halting the Expansion of Electric Vehicle Adoption

Subsidiary of Norilsk Nickel Metals and Mining in Monchegorsk, Murmansk region, Russia, Kola's nickel sheet

[Asia Economy Reporter Choi Dae-yeol] As nickel prices, a key material for electric vehicle batteries, soar, there are concerns that the expansion of electric vehicle adoption could be hindered. The surge in nickel prices is a result of accelerated efforts worldwide to secure inventory following the West's intensified economic sanctions after Russia's invasion of Ukraine. Russia accounts for about half of the world's nickel exports. With major raw material prices rising since last year, battery prices have rebounded for the first time ever, and the situation in Russia is expected to further exacerbate battery supply shortages.

According to industry sources on the 10th, the London Metal Exchange (LME) in the UK announced on the 8th (local time) that "due to an unprecedented overnight surge in nickel prices, nickel trading will be suspended for at least the remainder of today." On that day, nickel futures on the LME surged about 111% intraday, reaching an all-time high of $101,365 per ton. According to the Korea Mining Industry Promotion Agency's Korea Resource Information Service, nickel prices, which exceeded $20,000 per ton at the beginning of this year, skyrocketed to $42,200 on the 7th, more than doubling. This is the aftershock of the large-scale sanctions led by the United States following Russia's invasion of Ukraine.

Nickel is a key material in cathode active materials that determine battery capacity and performance. The LME is expected to maintain the trading suspension at least through this week. Nickel inventory, which exceeded 260,000 tons in mid-last year, has steadily declined and dropped to the mid-70,000-ton range this month.

Battery prices, which had steadily fallen over the past decade, began to show signs of rebound in the second half of last year. This is due to the increased use of secondary batteries across industries and daily life, such as electric vehicles and energy storage systems (ESS). According to market research firm BNEF, battery prices, which were around $684 per kWh in 2013, dropped to $132 last year. This was the result of substituting expensive materials and refining manufacturing processes.

BNEF reported that prices had continuously declined since 2010 but predicted a slight increase to $135 per kWh this year. The firm initially forecasted that by 2024, battery prices would reach $100 per kWh, making profitability comparable to internal combustion engine vehicles. However, at the end of last year, this timeline was pushed back by about two years. This is because the expansion of electric vehicle adoption in the US, following China and Europe, has caused a surge in battery demand and consequently a spike in key raw material prices.

Tesla electric car charging

Although raw material prices cannot be immediately reflected, the industry is concerned that if this situation prolongs, it could drive up battery prices and, consequently, electric vehicle prices. Typically, raw material transactions in battery manufacturing are based on mid- to long-term contracts, so immediate price increases are not directly reflected in actual transaction prices.

However, with raw material supply itself becoming difficult and no signs of improvement, a chain of price increases is expected to be inevitable. Although battery prices have fallen significantly compared to the past, they are still estimated to account for 20-30% of electric vehicle production costs. This is the same reason why major electric vehicle companies like Tesla and Rivian raised or attempted to raise prices in the second half of last year.

An official from the finished vehicle industry said, "Electric vehicles still have relatively high prices for key components such as batteries, resulting in lower profitability compared to conventional internal combustion engine models. However, since pricing is flexible depending on policy issues such as government subsidies in each country, it is difficult to make premature judgments."

This content was produced with the assistance of AI translation services.