Russia’s invasion has been condemned around the world, sent more than 1.5 million Ukrainians fleeing abroad, and triggered sweeping sanctions that have isolated Russia to a degree never before experienced by such a large economy. Nickel prices have soared to all-time highs in the wake of Russia’s invasion of Ukraine, threatening the global transition to electric vehicles.
Commodity markets have been shaken not only by tough Western sanctions on Russia that might be widened to include oil, but logistics turmoil that has blocked the flow of grains and metals from the region. The searing rally in raw material prices has sparked concerns over economic growth in countries still recovering from the COVID-19 pandemic.
Oil prices spiked after the United States and European allies said they were considering banning imports of Russian oil. Brent crude surged as much as 17.8% to $139.13 a barrel, its highest since July 2008, when it hit a record of $147.50, but later reversed and shed $20. Germany said it did not currently plan to stop energy imports from Russia.
The London Metal Exchange suspended trading in nickel on Tuesday for the first time in its 145-year history after prices doubled in a matter of hours to $100,000 per metric ton. Prices eased back to about $80,000 per metric ton. But that’s still far above the previous record of $52,000 per metric ton set in 2007. The metal is a key component in lithium-ion batteries used in EVs, and is one of several commodities that have spiked in price since Russia attacked its neighbor. Markets fear Western sanctions will limit exports from the region, resulting in supply shocks. Russia is the world’s third biggest supplier of nickel behind Indonesia and the Philippines, making up about 13% of global mining capacity in 2021.
Rising nickel prices are another potential headache for automakers who have spent the past year grappling with supply chain disruptions, plant shutdowns and a shortage of semiconductor chips.
Due to the impact of geopolitical conflicts, the transaction and transportation of nickel from Russia were hindered and delayed, which pushed up the price of nickel. At present, as the Philippines is in the monsoon season, and the supply of nickel ore has not increased significantly due to seasonal shipment problems. Nickel ore imports are unlikely to pick up until the monsoon season in Surigao ends in Q2. In response to growing number of confirmed COVID cases at ports recently, the pandemic prevention and control measures at ports have escalated, which have caused delays in the arrivals of nickel ore and further pushed up production costs.
Similar to lithium and cobalt, nickel is one of the important raw materials for the production of power batteries, and is mainly used in NMC batteries. At present, stainless steel is the largest downstream sector of nickel, accounting for 68% of global nickel consumption. However, with the explosive growth of the new energy industry, from 2020 to 2021, the proportion of nickel consumption in power batteries has increased from 10% to 15%.
In the nickel ore-NPI-stainless steel industry chain, stainless steel mills will continue to grapple with shortages of nickel raw materials and rising nickel raw material prices. Stainless steel mills have raised their offers significantly. However, #300-series cold-rolled stainless steel mills who rely on external high-grade NPI still suffer a loss of 2%. The profit margin is extremely thin, and it is difficult for higher raw material costs to pass onto end users. Steel mills are resistant to expensive nickel raw materials, and the wait-and-see mood is strong.