The wildly fluctuating prices last month are also a reflection of how inelastic demand can be for key minerals in the short term. Jones’ metals and mining team had forecast a nickel shortfall by 2026, even before the Russia-Ukraine war. In the long term, there is also a growing supply problem. The uncertainty also led Spanish stainless steel manufacturer Acerinox to temporarily stop new orders of nickel, according to reporting by Bloomberg.Īnd even though EV batteries require only small amounts of nickel, Morgan Stanley analyst Adam Jones says a price hike like the one seen in February, if permanent, could raise EV prices by $1,000. For example, Chinese producers of nickel sulfate stopped offering product because they felt it was too difficult to understand how the speculation was distorting real shortage-driven price increases, according to Rystad Energy. In the short term, they have been disruptive to battery production. The price spikes, though likely temporary, still matter. “There are substitutes for cobalt, there are substitutes for lithium that are available but these are not available for nickel, mainly because the price has been so low.” “There are very few substitutes for nickel,” said Ramanan Krishnamoorti, a chemical engineering professor and chief energy officer at the University of Houston. Increasing the amount of nickel to a battery’s cathode can boost its energy density, meaning more range per pound of battery. Nickel is particularly well-suited for increasing the range of EV batteries. Maintaining a reliable and cost-efficient source of nickel matters for the energy transition in part because nickel plays an important role in EV battery performance. High-grade nickel is the only nickel suitable for producing nickel sulfates used in the manufacture of batteries. These sulfide deposits come from a lower depth and are more costly to mine in general. High-grade nickel (known as class 1) has a nickel content greater than or equal to 99.98% and generally comes from sulfide deposits. Price depends on the grade and the relative difficulty in mining it. The challenge in sourcing nickel, then, lies not in finding it but in locking in the most competitive price. There are also extensive nickel reserves on the ocean floor. And several countries have reserves of nickel rivaling those of Russia, including Latin American neighbors Brazil and Cuba. Indonesia, for example, currently produces about three times as much nickel as Russia, while Australia, New Caledonia and the Philippines roughly match Russia’s production rate. Nickel is currently mined in many countries around the world. To clarify, nickel is not a scarce resource like lithium, which has received a lot of press attention for its role in the semiconductor shortage. “However, this current round of sanctions is extraordinary and unprecedented even in the complex world of commodities.” “Supply chains do factor in geopolitical risks,” Kidd said. Such a dramatic price jump is more a reflection of how unexpected the disruption was than about the global market’s ability to adjust, according to Margaret Kidd, program director of Supply Chain & Logistics Technology at the University of Houston. (The LME has established daily price limits to combat the impact of short-term speculation on pricing.) Speculative shorting of nickel has been largely responsible for the temporary price spikes and it has continued to fluctuate, trading as of March 24 at $35,000 per metric ton. Prices on the London Mercantile Exchange (LME) had been bouncing around $20,000 per metric ton at the end of the year, but started climbing in early February in response to concerns of war.īy the second week of March, prices on the exchange closed more than five times higher, when trading was temporarily suspended. These factors have created chaos in the nickel trading market over the last couple of months. The London Metal Exchange is also considering blocking Russian deliveries, providing even less certainty about Russia as a future source of the metal. Nickel hasn’t been specifically targeted, but the recent price fluctuations reflected concerns that it will be included in the future. About 11% of global nickel production last year came from Russia, but its decision to invade Ukraine has made sourcing from Russia more complicated.Īt the beginning of the invasion, the west banned imports of certain Russian commodities, followed by Russia’s announcement that it would withhold exports. That brings us to Russia, one of the world’s top suppliers of high-grade nickel at a competitive price.
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