Friday, September 30

The automobile industry was already having trouble making cars. The nickel crisis is going to make it worse

The year 2022 is not going to be good for car manufacturers, much less for users who decide to buy a vehicle. Without yet getting out of the semiconductor crisis, which has been plaguing the sector for several years, and with the price of energy skyrocketing for months, a third factor points to making production costs enormously more expensive: the increase in the price of metals such as nickel, palladium or aluminum as a result of the war in Ukraine.

Why will prices increase? Russia is one of the world’s leading exporters of the aforementioned metals and others that are also used by the automobile industry in their production chains. And although the West has not yet applied sanctions in this sector, those that it has announced in others, together with the withdrawal of important multinationals from the country led by Vladimir Putin and the uncertainty generated in the markets by the war, are making it already increasing the cost of these raw materials.

This increase is due to the fact that many manufacturers of components for automobiles are beginning to move away from Russian metals as a precaution, to try to reduce their dependence on raw materials to which the United States and the European Union could turn off the tap one day. for another, according to Reuters.

historical highs. It is still too early for the consumer to notice the increase in the cost of metals in the final sale price of vehicles, but the war in Ukraine is already having an impact on the transactions of these raw materials on a large scale. Last Monday, aluminum and palladium reached record highs, and nickel, which is used, among other things, in car batteries, exceeded 100,000 dollars per tonne for the first time in history on Tuesday.

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The rise in nickel has been precisely the one that has had the most impact on international transactions in the metal to date. So much so that the world’s most important futures market for these raw materials, the London Metal Exchange, had to suspend trading in its contracts after an accumulated rise in its price of 250% in its last two sessions. It should be noted that Russia produces 17% of all the premium nickel used in the world.

Clouds announcing a storm. The last time the London Metal Exchange suspended trading in one of its contracts was during the 1985 tin crisis, which caused millions in losses and the bankruptcy of several international companies and organizations. The situation at the time was so dire that the London metal exchange had to ask the Bank of England and other private banks for help, and it changed this London commodity market forever.

Rains, it pours. Thus, the foreseeable metals crisis that the war in Ukraine will cause will hit hard a market that has already been hit hard by the shortage of components, especially that of semiconductors in recent years, and which is already being affected by another crisis, energy, also aggravated by the armed conflict. Some manufacturers, in fact, have already been forced to ask their customers for higher prices than they already had agreed, because otherwise they would lose money, according to Reuters.

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The Ukraine conflict is going to claim two unexpected victims: fertilizers and wheat

Other manufacturers, however, hope that the end of the chip shortage, which could come as soon as 2023, will offset the rise in metals and balance costs, so that customers do not notice significant price increases. Some increases that, however, have already hit consumers before with the semiconductor crisis, which only in 2021 caused the average price of new cars to rise by 3% compared to 2020.

Electrification delay. The scarcity and increase in prices of Russian metals can particularly harshly affect the electric car industry, since high-quality nickel is a very important component of the batteries of these vehicles.

Likewise, this raw material is crucial for the energy transition, since it is used to manufacture photovoltaic panels or wind turbines, so the war could not only deepen the energy crisis that Europe is experiencing due to its dependence on gas and oil but also could prevent the EU from carrying out its plan to be more independent in this aspect, which involves the use of renewable energy, for which it needs to expand the facilities that generate it.

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