Russia’s invasion of Ukraine will be affecting consumers all the way from the petrol pump to the kitchen table, but not necessarily in expected ways.
The price of nickel rose 250 per cent in just 48 hours to a high of $US100,000 a tonne before trading was stopped this week. The key instigator of the spike was a bet on nickel’s outlook by Chinese tycoon, Xiang Guangda, who controls the world’s largest nickel producer — Tsingshan.
Through Tsingshan, Mr Xiang is reported to have built a massive short position in nickel futures and faces billions of dollars in mark-to-market losses as the conflict pushed nickel prices higher. As the likes of Tsingshan and its brokers rushed to close out their positions, the price surge forced the London Metal Exchange (LME) — the primary market for selling nickel — to temporarily halt trading of the metal.
But even with the temporary disruption out of the way, nickel prices look likely to stay elevated for some time ahead. And the LME can do only so much to help rescue nickel users from the long-term rise in nickel’s price, which hit record highs at the start of the year due to rising demand as economies decarbonise.
That has huge implications for the manufacturers that use nickel as a crucial ingredient in products ranging from electric vehicle batteries to the stainless steel used in coins, forks, spoons and your tin of baked beans.
Toasters and electric ovens also rely on it.
Around 10 per cent of the world’s supply of nickel comes from Russia and while up to 70 per cent of nickel demand is for stainless steel, new applications, like electric vehicles, are already also squeezing supply.
In 2020 Tesla founder Elon Musk was already tweeting about the challenges of finding enough nickel for its vehicles, saying “nickel is the biggest challenge for high-volume, long-range batteries.”
“Nickel is the single biggest component in terms of cost,” Sam Abuelsamid, principal research analyst at Guidehouse Insights, told Bloomberg this week.
The news services estimated that, based on the average cost of nickel last year a battery for an electric vehicle would cost around $US1,200. That would have risen to $US1,900 by last Friday, which was before the price of nickel rocketed 250 per cent.
The metal has joined a list of commodities expected to soar in price as demand for electric vehicles booms, such as rare earth elements and lithium, which has soared in price over the past year and is also expected to struggle to match demand from car manufacturers such as Tesla.
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