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GlobalData: Russian nickel sanctions would slow electric vehicle adoption

Sanctioning Russian nickel will slow the adoption of electric vehicles (EVs) and hinder the decarbonization of Western economies, according to GlobalData. The data and analytics company notes that such actions will simply mean Western countries will be more reliant on Russian oil and gas for longer.

According to GlobalData’s Mining Commodity Analyzer, Russia was the third-largest producer of nickel in 2021, producing more than 200,000 tons. As nickel is used in the production of EV batteries, any sanctions placed on Russian nickel will cause EV manufacturing prices to increase further, threatening adoption and decarbonization.

The evolving situation in Russia and Ukraine has already caused unprecedented increases in the price of nickel. Following overnight increases in the 3-month nickel price earlier this week—with prices on the London Metal Exchange (LME) up as much as 250% in two trading days above $100k per ton—the LME made the decision to suspend trading in the metal on 8 March. Trading had yet to resume as of 10 March.

Geopolitical issues such as the Russia-Ukraine situation disturb the fine balance of battery metal supply chains. A skyrocketing nickel price would have major repercussions on the climate ambitions of countries around the world, and will ultimately hamper the adoption of EVs.

The extra costs will be felt somewhere, either hitting the profits of automakers, or being passed on to customers. Now is a critical time for EV adoption, as advanced economies aim to accelerate the decarbonization process.

Russia has reportedly been looking to reduce the impact of sanctions by turning to Asia for trade. EV and battery companies in China may well step in and buy the commodity at lower prices. China already has a strong position in the battery metal supply chain, and buying Russian nickel on the cheap as a result of sanctions would further strengthen its globally competitive position.

—Daniel Clarke, Analyst specializing in batteries on the Thematic Research Team at GlobalData

Dr Lil Read, Thematic Analyst at GlobalData, adds:

It is possible that another nickel-producing nation such as Indonesia or the Philippines could step up and supply western automakers with nickel, but this would lead to two negative consequences for companies downstream.

Firstly, Western automakers would see an increase in emissions across their supply chains—as these two producing countries are geographically further afield and frequently engage in environmentally unfriendly practices. Secondly, this would lead to an increase on the reliance on China for companies downstream, as Chinese companies play a key role in the main nickel mines in these countries. The reshoring and ESG-proofing of battery supply chains are two challenges that automakers have been grappling with for the last few years.

Considering other battery types that may have the potential to increase in popularity as a result of the situation, Read comments:

Battery innovation has been mind-blowing over the past few decades, but no innovations are going to happen overnight. We expect that lithium-ion phosphate (LFP) batteries, which do not contain nickel or cobalt, will see an increase in popularity and adoption over the medium term if the conflict continues. However, lithium has its own limitations.


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