S&P Global Mobility, formerly IHS Markit's automotive team, said Russia's invasion of Ukraine has exacerbated price pressures by inflating raw material prices. Nickel is of particular concern, since Russia is the world's third-largest supplier of the metal. Norilsk Nickel, the world's biggest producer of high-grade nickel used in EV batteries, is based in Russia.
German chemicals giant BASF, which manufactures nickel and cobalt for automotive batteries, said it will not sign new agreements with Norilsk because of the invasion. S&P said other manufacturers have suggested they will do the same.
While Norilsk has not been the target of economic sanctions imposed by the U.S. or other countries, uncertainty about where companies will source nickel has rattled the market, as has the lingering threat of further sanctions, among other factors.
Nickel, which has traded for between $10,000 and $20,000 per ton over the past decade, traded for more than $100,000 per ton on March 8, triggering a weeklong suspension of nickel trading on the London Metal Exchange. Prices have since dropped.
"It's clear that at current prices, we will see, at a minimum, any price reduction linked to batteries' economies of scale wiped out by increased input costs," the March 9 report reads.
"It is also clear that should these elevated price levels continue into 2023 and beyond, the likelihood of a delay of the tipping point for [internal combustion engine] versus BEV cost parity — a critical metric to measure battery-electric vehicle adoption — markedly increases."
According to S&P, nickel has become a popular metal for battery manufacturers to use as a substitute for cobalt. Cobalt has been linked to human rights abuses in Congo, which produces much of the world's supply of the metal.