Nickel’s price surge threatens carmakers’ EV push

Price increases of metals essential for electric batteries could spell trouble for automakers who are already struggling to keep costs down in the face of supply chain disruptions, market insiders said Wednesday.

The price of nickel is surging as Russia, a key supplier of the metal, faces extensive global sanctions over its invasion of Ukraine.

On Tuesday, the price of nickel doubled to $100,000 per metric ton, causing the London Metal Exchange to suspend trading for the rest of the day on worries over a supply crunch. 

Korea’s Mineral Resource Information Service data also showed that nickel’s price jumped by 132.5 percent on Monday to 53 million won ($42,900) per ton compared to a year ago.

Although Russian metals have not yet been targeted by Western sanctions, major shipping firms like MSC and Maersk have significantly reduced shipments after the country came under economic penalties. Russia produces about 10 percent of the world’s nickel.

Nickel is a critical raw material in lithium-ion battery cells used in most EVs sold on the global market, including South Korea. 

Traditionally, lithium-ion batteries used cathodes that were about one-third nickel. But in recent years, global automakers have increased the percentage of nickel in cathodes to enhance batteries’ energy density so that EVs can drive for longer distances. While the global average is around 60 percent, Korea’s three battery makers -- LG Energy Solution, Samsung SDI, and SK On -- have been manufacturing batteries containing up to 90 percent nickel since last summer.

Market insiders are concerned that such abrupt price increases could undermine Korean automakers’ EV penetration plan in the long term, even though it is unlikely to immediately impact production.

“Battery makers will not be influenced immediately (over the nickel price surge), as they mostly hold a large inventory. But if the situation continues, it could pose a significant risk to their production volume and price setting,” an industry insider who asked to remain anonymous told The Korea Herald. 

Korean battery makers do not import nickel from Russia, but from China and Australia.

The more expensive raw materials usually mean a hike in product prices, as at least 40 percent of EV costs comes from the cost of batteries. A price surge in nickel could likely lead to increased EV prices, making it hard for finished carmakers to sell more cars. 

The price of Korean cars has been on an upward trend in recent years, not only due to shortages of auto components, but also because of higher raw material costs. Steelmakers such as Posco and Hyundai Steel have increased their prices for automotive steel by 120,000 won per ton last year.

According to Hyundai Motor Group, the price of its sister company Kia’s hybrid model All-New Niro has increased by at least 2.2 million won, and starts at 26.6 million won. The carmaker said the price tag reflects the model’s upgrades in five years with enhanced vehicle performance and inclusion of high-tech functions.

“As price surges in raw materials lead to increased EV cost, customers could see EVs as an unfeasible option. This could hamper carmakers’ ambitious transition to relying on EVs as a heavy portion of their sales,” said Lee Ho-geun, professor of automotive engineering at Daeduk University. 

According to Tesla, its cheapest Model 3 saw a 18 percent price increase compared to a year ago. Another US EV maker, Rivian, also announced a 20 percent price hike earlier this year, but walked back on the plan after disgruntled customers canceled their preorders.

By Kim Da-sol (ddd@heraldcorp.com)