With nickel prices soaring past 15-year highs to hit new record levels, car buyers eyeing a new Tesla may soon find themselves reaching deeper into their pocket for their next purchase.
Electric-vehicle fans like to gloat about paying less to charge up than conventional drivers at the fuel pump, but battery-powered cars have not entirely been spared from inflationary pressures.
Spiraling costs for a wide range of raw materials were the number one reason why EV startup Rivian last week ignited a storm of controversy when it imposed an exorbitant price hike on customers.
While many are familiar with the importance of lithium in EVs, a lesser-known commodity increasingly crucial for powering the car’s battery is nickel.
On Tuesday, the three-month nickel contract on the London Metal Exchange traded at $101,365 per metric ton, double the LME’s prior historic high of $51,800 from May 2007, amid reports a speculative bet by a China Construction Bank subsidiary had backfired horribly.
The surge prompted the exchange to suspend trading in the base metal for the first time in its 145-year history, according to Rystad Energy.
“Fears over nickel supply disruptions following the Russia-Ukraine conflict continued to be aggravated, inciting extensive buying,” it wrote in a research note to clients, adding Vladimir Putin’s country is the third-largest supplier of nickel, accounting for nearly 13% of global mining capacity in 2021.
Traditionally known as a main ingredient for producing stainless steel, nickel has recently become the favored metal for substituting most of the cobalt in an EV cell, the basic building block of a battery pack. Unless hedged by long-term supply contracts, a price spike would immediately hit a cell manufacturer’s bottom line.
“A doubling of lithium or nickel prices would induce a 6% increase in battery costs,” the International Energy Agency estimated last May. “If both lithium and nickel prices were to double at the same time, this would offset all the anticipated unit cost reductions associated with a doubling of battery production capacity.”
Nickel-rich chemistries can pack in more energy pound for pound than those using manganese, are typically cheaper than ones heavily relying on cobalt, and are not saddled to the same degree by the drawbacks of this mineral, which is predominantly mined in only one country in the world and closely associated with child labor.
Tesla, for example, has said it will effectively source just two types of batteries going forward that are differentiated mainly by the metal used in their cathode, one of the two electrical poles in a battery cell.
Whereas affordable entry models will rely on an iron-based chemistry, Tesla’s vaunted next-generation 4680 cylindrical cells will employ a nickel-rich cathode for its more premium long-range cars.
Crippling economic sanctions imposed against Putin’s Russia are now further stoking the broader trend in higher raw material costs that has fueled inflation around the world.
“Cathode producers and battery manufacturers have found it increasingly difficult to absorb the price hikes in the battery upstream minerals,” Rystad Energy added, referring to metals like nickel and lithium.
One of those companies affected is BASF, the world’s largest chemical company by sales.
As part of an EU-wide plan to build an EV battery supply chain, BASF plans to finally start production this year of cathode raw materials in Germany. Analysts are alarmed, however, as it struck a deal five years ago to procure nickel from Russian mining group Norilsk.
Attempting to assuage their concerns that the EU might target Norilsk for sanctions, potentially cutting off its supply of nickel, BASF chief executive Martin Brudermüller argued Europe had little alternative to the Russian miner if it wants to tackle road transport emissions, responsible for a fifth of the EU’s total carbon footprint.
“Given the pressure the EU Commission puts now on bringing the combustion engine into a decline and actually moving on with the EVs…I don’t expect that this is part of the sanctions package,” he told them a day after Russian tanks rolled into Ukraine.
That’s little consolation to Rivian buyers in the U.S., however. They can expect to pay thousands of dollars more for their award-winning R1T electric truck going forward amid sharp spikes in lithium, nickel, and other commodities used to build the vehicle.
Tesla buyers are also forewarned. Citing the Rivian controversy, a closely watched Tesla influencer asked Elon Musk to please be gentle when it comes to pricing the upcoming Cybertruck.
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