Nickel shortage does not threaten the world

Electric cars have become one of the biggest breakthroughs in the green revolution and transition to responsible consumption in recent years. The number of orders for new electric cars are increasing rapidly year over year. In some countries around the world, the number of orders are doubling.

All well-known car manufacturers have announced the creation of their own electric car models.

However, the unexpected war with Ukraine has added to the nervousness of the global market, not only about energy, but also about the supply of rare-earth metals. Many metals are used in batteries, without which there is no way to create an electric car and reinforce the green transition and responsible consumption.

One of the most notable metals is nickel.

But nickel was a problematic metal even before the market pressure triggered by the Russia-Ukraine crisis. The United States produces less than 1 percent of the world's nickel, all from one facility, the Eagle Mine on Michigan's Upper Peninsula. There are no processing facilities in the United States, so Eagle Mine nickel concentrate is exported to Canada and overseas, according to the U.S. Geological Survey, which tracks supplies of strategic metals.

Russia produces about 11 percent of the world's nickel, and its sulfur-rich ore yields the high grade Class 1 nickel needed for EV batteries. But the processing of that metal can be highly polluting. Russia is the source of 20 percent of the world's Class 1 nickel, and its biggest producer, Norilsk Nickel, has been positioning itself to become a major EV supplier, initiating a multibillion program last year to clean up longstanding pollution at its mines and smelters in the Arctic.

After the war broke out, NATO nations refrained from sanctioning Norilsk Nickel or its chairman, businessman Vladimir Potanin, as the trans-Atlantic allies sought to avoid moves that would shock the global economy. But the private sector and markets were spooked anyway, much as oil markets were, despite initial efforts by the United States and Europe to avoid sanctioning Russian oil. Germany's BASF, a major EV battery producer, announced it would fulfill existing contracts with Norilsk Nickel.

Traders began factoring in the potential loss of Russian nickel on the world market, and the run on nickel turned into a stampede, as a Chinese tycoon who had built a massive short position in the metal was temporarily unable to cover billions of dollars in losses. The short seller was able to extract himself from the squeeze by reaching a deal with his lenders, but the London Metal Exchange faces lingering questions and possible litigation over its actions to stem the mayhem.

The nickel upheaval comes at a pivotal time for electric vehicles, which in 2021 saw global sales more than double to 6.6 million, accounting for close to 9 percent of total sales and tripling their market share from two years earlier, according to the International Energy Agency. Now a war and commodities volatility, in addition to lingering pandemic-related supply woes, mean a bumpy road ahead for automakers, just as they are seeking to accelerate their move to all-electric.

Norilsk Nickel's press service issued a statement at the beginning of March where it said that the production of rare metals continues.

"Despite unprecedented new challenges, Nornickel continues to operate at all sites. We are mining ore, producing and selling metals, and continuing to implement our investment programs," the company reported. Later, Potanin said that the company is fulfilling all its international obligations, and the Russian government allowed Norilsk Nickel to repay its foreign currency liabilities to foreign partners.


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