A driver uses a mobile phone fast charging station at John F. Kennedy Airport (JFK) on April 2, 2021 in New York City.
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Nickel prices are on the rise as investors take on a new global reality: Russia, a major supplier of the metal, is now facing sweeping sanctions after Invasion of Ukraine.
In an unusual step, the London Metal Exchange Nickel trading suspended on Tuesday morning after the three-month contract price more than doubled to more than $100,000 a tonne.
Nickel is a key ingredient in the lithium-ion battery cells used in most electric vehicles sold in – and planned for – the US market. Its abrupt price surge has left analysts and investors questioning the automakers’ ambitious electric vehicle programs.
Morgan Stanley auto analyst Adam Jonas is one of the biggest to raise concerns. In one notes published on Monday“According to this writing, nickel is up 67.2% today alone, which corresponds to a roughly $1,000 increase in the input cost of an average EV in the US,” he said.
Jonas wrote that investors should lower their expectations for carmakers earnings and electric vehicle sales penetration over the next few years, as a sudden rise in the price of nickel could dent undermine the ambitious EV plans that global automakers put in place, including Synthetic engine and Ford Motor.
Why is nickel important for EV batteries
Lithium-ion battery cells have three layers:
- cathode containing lithium mixed with nickel and other minerals such as cobalt, manganese or aluminum
- an anode, made of carbon graphite and sometimes silicon
- a separator made of porous polymer
There is also a liquid electrolyte, usually made of lithium salts dissolved in a solvent.
When the battery cell is charged, lithium ions are transferred from the cathode to the anode. When the cell is discharged, the ions move back to the cathode, releasing energy.
In recent years, automakers have discovered that adding more nickel to the cathode can increase a battery’s energy density, which translates into more battery life per pound.
Older lithium-ion batteries used a cathode one-third the size of nickel. But in recent years, automakers have increased the percentage of nickel in the cathode to increase the energy density of the battery and increase the vehicle’s range. Most currently use cathode containing at least 60% nickel.
Some use even more, partly to reduce or eliminate cobalt, and partly to increase density for high-end applications: The cathode in the giant Korean battery cell LG Chem provided for Tesla We 90% nickelfor example.
Analysts raised pre-war concerns
High-nickel batteries offer significant advantages to electric vehicles. But even before Russia invaded Ukraine, nickel wasn’t cheap, and experts are growing concerned about a potential shortage as global automakers ramp up production of electric vehicles.
Analysts at Rystad Energy warned last fall that global demand for the premium nickel needed for EV batteries was likely to outpace supply in 2024, an announcement that since then has been echoing by other commodity analysts, including Jonas’s partners at Morgan Stanley.
Due to the relatively high cost of nickel and the supply concerns that were voiced before Russia invaded Ukraine, automakers have signaled that lithium-ion batteries with high-nickel cathode are likely to be limited in premium applications. Where power density is a must (for heavy-duty trucks) or a key selling point (for luxury sedans).
How can this price increase happen
Assuming that the rise in the price of nickel is sustained, the quick and obvious workaround is for electric vehicle costs to rise – and more so for higher-end electric cars.
Automakers that haven’t locked in nickel supplies at pre-invasion prices will have a tough choice. They can choose to absorb the increase in costs, reducing their profit margins; or they may try to pass it on to the consumer. Most likely will do some of both.
Not all EVs will be affected. There is a replacement battery that has been used for cheaper electric vehicles, although it comes with tradeoffs. Lithium iron phosphate batteries, or LFPs, use iron phosphate in their cathode, requiring no nickel or cobalt.
LFP cells cost less than lithium-ion cells, but they also have a lower energy density – meaning LFP battery packs weigh more per mile in range than lithium-ion battery packs. they. That weight has made LFP batteries less than ideal for higher-end vehicles, as the extra weight limits performance and can impede vehicle handling. That is of less concern with price-restricted mass-market models. Chinese carmakers, under pressure from the government to encourage EV adoption, have been using LFP batteries in their low-cost electric vehicles for several years.
LFP technology gets a boost in visibility in the US as Tesla started using LFP . battery in the entry-level “standard range” models last fall. At the time, the switch to LFP was seen as a way for Tesla to reduce the cost of making those models — or in other words, to increase the profits of those imported cars without raising prices.
Now, with nickel prices skyrocketing, we could – once again – see major global automakers follow in Tesla’s footsteps.
