The metal is a core part of electric vehicle batteries.
3/21/2022
Nickel prices have been on a hell of a ride recently. The price of nickel saw an unprecedented surge earlier this month, doubling in price to $100,000 per ton on March 8. It has since swung wildly downward to $31,380 per ton as of Monday. The big initial spike was most immediately due to the impact of sanctions placed on Russia for its invasion of Ukraine, but there’s more to it; resources like nickel and lithium have been squeezed for almost a decade, and analysts have been waiting for the impending shortage to catch up with the rush to build out renewables and other clean energy technologies like electric vehicles.
Sure enough, supply chain watchers quickly looked toward green tech like electric vehicles as news of the short squeeze circulated across Twitter. “The price of nickel is going hyperbolic in a short squeeze for the ages today,” tweeted Ryan Petersen, CEO of global logistics platform Flexport. “Reminder that nickel is a key input for electric vehicle batteries.”
Oil and gas prices have also surged in tandem, as anyone who’s been to the gas pump recently knows. (Big Oil has also been raking in record profits due to commodity price swings.) This is creating a complex problem: People are seeking out EVs right as supply chain issues tracing back to the price of battery metals will make that demand increasingly hard to meet.
“We’ve woken up, for the first time in a couple of decades, to the geopolitical reality that things are impacted by commodities production,” said Jonathan Crowder, founding partner of renewables-focused investment firm Intelis Capital. “But the impact is slightly different because rising gas prices have the immediate impact that’s being felt at the pump today.”
Robert Mullin, general partner at the natural resources investment advisory firm Marathon Resource Advisors, sees something similar. He’s been bracing for the cost and supply shortage of battery metal mining to catch up with EVs since long before the Russian invasion of Ukraine. In fact, he predicted in a January 2021 report that, after nearly half a century of natural resources declining in value, prices are set for a rebound, due in part to supply chain constraints.
“We were naturally set up to have crises in all of these metals, materials and oil over the next two to four years anyway. Ukraine just brought it all forward,” he said.
But consumers are more likely to pay attention to the price of EVs, not intricate issues in the battery metals supply chain, said Crowder. A Morgan Stanley report released earlier this month pointed out that the surge in battery metals could increase the price of EV production by about $1,000 a car — something Crowder said is fairly marginal for now, but could make it harder for some would-be EV buyers to take the plunge.
The wild price swings can be seen in the ups and downs of Rivian’s fortunes recently. The company initially said it would raise preorder prices on two of its vehicles because of supply chain constraints and inflation. Then it walked that decision back after social media uproar, and a shareholder is suing. Tesla, too, announced 5% to 10% price hikes across all of its vehicles last week.
To adapt, Mullin said that EV companies should vertically integrate their natural resource mining supply chain. Tesla, for example, has created some buffer to price fluctuations and supply constraints by signing a deal with Minnesota-based Talon Metals Corp., which mines nickel.
But batteries aren’t only made of nickel — they include other metals, like cobalt and lithium, too. Vertically integrating all those types of mining could prove challenging for companies trying to produce the EVs we need to both get off oil and stave off the climate crisis.
Though batteries made with nickel can’t just be swapped out for other types of batteries into the same cars, several companies are working on creating battery packs that use different types of metals that could be used in new EVs. Zinc-air and sodium-ion varieties are widely considered the most promising.
Vertical integration could come with another challenge as well, particularly as companies set stringent climate and ESG goals. Mining can be environmentally destructive and the industry is rife with human rights abuses. By vertically integrating mining operations, Mullin said EV companies might find it harder to meet their ESG goals.
Yet solving these issues and making the mining industry a more just one is essential going forward. The Russian war on Ukraine and the volatility in the oil market show the need to kick fossil fuels to the curb, a move that would also weaken petrostates. But the climate crisis also demands we wind down carbon pollution or suffer a vastly degraded future. The Intergovernmental Panel on Climate Change found in a 2018 report that the world needs to increase renewable energy production up to a staggering 470% by 2030, all while oil, gas and coal use fall. The current wild swings in the nickel market show the need for policies and government support to keep EV and renewable tech prices low enough to spur even more widespread adoption.
Crowder, for his part, isn’t too worried. These supply chain issues, too, shall pass. “We have to look at the overall arc of battery pack prices over the last 10 years, which have fallen massively,” Crowder said. “I’m hesitant to call this the apocalypse for electric vehicles.”
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