Global Nickel Shortage to Slow EV Takeup
Sales of electric vehicles (EVs) in the UK enjoyed their best year by far in the financial year 2021-22. Even though the registration of new cars and vans as a whole was well down compared to pre-covid levels, much more of these vehicles were either fully electric or plug in hybrids. In one year, sales of these models exceeded those in the preceding five years combined; so successful was 2021 that nearly one fifth of every new vehicle bought in Britain was a battery electric vehicle (BEV). Unfortunately, the materials which make up these batteries and vehicles has become extremely expensive, which is sure to have a considerable impact on sales in the near to medium term future.
EVs / BEVs are powered by lithium-ion batteries. Also known as li-ion, this technology is highly efficient, safe, and – very importantly – makes the batteries completely rechargeable. The UK’s MOT checking protocol already includes safety checks for these batteries. Companies like Tesla who invested heavily in their early development decided on a combination of materials which make li-ion batteries as cost effective as possible; this combination was nickel, cobalt and manganese, or NCM. From the start, cobalt was always the most expensive material to obtain, so later generations of battery used less of it in their NCM ratio. This in turn led to a heavier reliance on nickel.
While this change in the ratio was sensible, world events have led to nickel becoming much more expensive than it was. On 8th March 2022, the London Metal Exchange suspended trading in nickel, having earlier imposed a price limit on it. This was because shares in the metal had hit $100,000 per ton, which was double its 2007 record high; all of a sudden, nickel had become a very valuable stock to hold; in fact, two and a half times more expensive over a few weeks. This kind of spike sets alarm bells ringing, and with good reason.
The expansion of demand and supply of plug in vehicles had already been hit by one shortage. Semiconductors, which are also known as computer chips, have been in short supply since 2020. There are a number of reasons for this, one of them being the difficulty and expense of mining the materials which make them up. As well as being essential to new computers, servers and mobile devices, semiconductors are also a vital part of ever new motor vehicle. As such, a large proportion of the MOT test examination procedure is based on the correct functioning of fixtures which use them.
Experts predict the semiconductor shortage will persist until about 2026. Meanwhile, attention on world markets has shifted focus to the supply of nickel. While the situation in Ukraine has led politicians to think of ways of averting the need for Russian oil and gas, not much mention has been made of the need for other commodities. The fact is, however, that Russia supplies fully one third of the highest grade form of nickel, which is exactly what is used in the production of EV batteries. One Siberian company alone accounts for 17% of the world’s best refined nickel.
In many ways, these recent materials shortages have created a perfect storm for EV manufacturers. The lack of semiconductors means that, physically, less of these vehicles can be made. The situation in Russia has also led to a dip in the availability of stainless steel. It is the nickel shortage, however, which will hit the industry the hardest over the coming months and years.
About half of the total cost of an electric vehicle is for its batteries. These power packs are what makes these vehicles special, and also why they are so relatively expensive compared to petrol and diesel powered machines. Although there are tax breaks available to offset this, and incentives to driving EVs in towns and cities, the lower the cost of the batteries, the more successful sales of these vehicles will be. With the ban on new petrol and diesel vehicles looming in 2030, the years leading up to that deadline will be seen as a crucial period for manufacturers to gain market share.
For these businesses – and indeed for many politicians – therefore, the soaring price of nickel could not have come at a worse time. While there are innumerable reasons to hope for a solution to the Ukrainian crisis, its impact on another natural resource should not go unnoticed.