Russia's invasion of Ukraine has had a negative effect on the global market for nickel, which is an ingredient in electric car batteries, raising fears that high prices could slow the transition away from fossil fuels.
The London Metal Exchange froze trading last week after the price of nickel doubled in one day. After two years of supply chain chaos caused by the Pandemic, the episode provided more evidence of how tensions in the Middle East are disrupting trading relationships that companies once took for granted, forcing them to rethink where they get the parts and metals they use to make cars and many other products.
Some companies that need nickel, as well as other battery raw materials, have begun looking for ways to protect themselves from shocks in the future.
In an interview on Thursday, the chief executive of Volkswagen'sAudi division said that the company was exploring buying nickel directly from mining companies.
The United States and Europe are trying to develop domestic supplies of commodities that come from Russia. There are nickel deposits in Canada and other places.
We need those metals for the green transition because of climate change, said Bo Stensgaard, chief executive of Bluejay Mining.
Establishing new mining operations is likely to take a long time because of the time needed to acquire permits and financing. Companies using nickel and steel will need to contend with higher prices, which will eventually be felt by consumers.
An electric-car battery can hold up to 80 pounds of nickel. According to estimates by the trading firm, the cost of that nickel would more than double in March to $1,750 a car.
Most of the world's nickel is used to make stainless steel, not car batteries. Russia has an outsize role in nickel markets. The world's largest nickel producer is Norilsk Nickel, also known as Nornickel. One of Russia's wealthiest people is Vladimir Potanin. Norilsk is one of a limited number of companies authorized to sell nickel on the London Metal Exchange.
The United States and Europe have not tried to block nickel exports, a step that would hurt their economies as well as Russia, because Mr. Potanin has not been a target of sanctions. Russian nickel could be cut off from world markets and that caused panic.
The trend would be to come down to a level close to where we last left off.
As hedge funds and other investors bet on rising demand for electric vehicles, nickel was on a tear. For the past five years, the price hovered between $10,000 and $15,000 a ton. Less nickel was being produced because of the Pandemic.
The price went above $30,000 in a few days after Russia invaded Ukraine. Then came March 8. The Tsingshan Holding Group of China made a huge bet that the price of nickel would go down, which was spread on the trading desks of brokerage firms and hedge funds in London. When the price went up, Tsingshan owed billions of dollars, a situation known on Wall Street as a short squeeze.
The London Metal Exchange halted trading after the price shot up to $100,000 a ton, threatening the existence of many other companies that had bet wrong.
There are shortages of essential metals. Russia is the world's largest exporter of the metal and the price of it has gone up as a result. The price of nickel has gone up.
Financial turmoil. Russia's access to foreign capital and its ability to process payments in dollars, euros and other currencies will be affected by the sanctions. Russia is also on alert for cyberattacks.
The market is broken, according to the head of trading at the London-based metals firm.
There is no indication that nickel prices will lead to factory shutdowns in the way that shortages of components made in Ukraine brought assembly lines at Volkswagen, BMW and other carmakers to a standstill. It will take a few weeks for price increases to trickle through the system.
Big nickel buyers like steel makers may be able to find alternative suppliers, use more recycled material or switch to battery designs that use less nickel.
The chief executive of Mercedes-Benz said in an interview that there is enough nickel. He said that it was not unlikely that we would have secondary effects from the conflict.
Mr. Duesmann said that the conflict in Ukraine underscored the need to move away from fossil fuels. He said that Russian oil plays a bigger role in the global economy than Russian nickel.
The retreat from the open markets that have been good for business is a concern for automakers. The global economy had held up well during the Pandemic, according to a trade expert.
Ms. Kamin said in an email that we should speak less of globalization being in crisis and more of international relations being at a low point.
The Ukraine conflict is a major blow to trade.
The reporting was contributed by Ana Swanson.
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