Automakers face soaring metal costs with Russian supplies at risk

Studemund’s company has also been contending with high prices for nickel.

Caspar Rawles, chief data officer at specialist consultancy Benchmark Mineral Intelligence (BMI), said that while Russia accounts for 5 percent of global nickel production, it supplies about 20 percent of the world’s high-grade nickel.

The metal is used to make batteries for electric vehicles, posing a fresh challenge for automakers already investing billions to move away for combustion engines just as demand for zero-emissions models is starting to take off.

Some of Russia’s high-grade nickel will probably end up in China, which is unlikely to impose sanctions on Russia, but this all comes at a time when automakers are facing rising bills for other EV battery minerals as demand outstrips supply.

“That is the main concern for the battery supply chain in that you have got record high lithium prices, and very, very high cobalt and nickel prices,” Rawles said. “This is just adding to battery mineral woes.”

Batteries are one the most expensive components in EVs and automakers have been hoping they will become cheaper so they can offer more affordable electric cars.

BMW said it was focusing as much as possible on recycling battery nickel, with up to 50 percent scrap nickel used in the high-voltage battery of its new BMW iX model.

When it comes to palladium, automakers also face a problem.

The auto industry uses it in catalytic converters for gasoline models – or platinum for diesel models – both of which still make up the vast majority of car sales.

Palladium prices have been rising for about six years and Russia accounts for about 40 percent of the global market.

“There is no other option beyond palladium and platinum for catalytic converters, and you cannot build a car without a catalytic converter,” said Chris Blasi, chief executive of precious metals dealer Neptune Global.

He said he bought a lot of palladium in December at $1,940 an ounce. On Monday, it hit a record $3,440.

Blasi estimated that the value of the palladium used in the average car is about $200, but that could easily double.

“Either consumers will pay more for cars, or if automakers cannot pass it on they will have to find cost savings somewhere else,” he said.

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