Norihiko Shirouzu and Heekyong Yang

SEOUL/BEIJING, (Reuters) – The surge in nickel prices caused by Russia’s invasion are being absorbed quickly by Asian electric vehicle battery manufacturers. This is thanks to long-term agreements and a diversified supply network, according to industry sources and companies.

Nickel prices doubled to above $100,000 per tonne on Tuesday. Sources blame short coverage by one of world’s most important producers. The London Metal Exchange (LME), had to stop nickel trading.

Sources said that Tsingshan Holding Group purchased large quantities of nickel in order to lower its short-term bets on this metal. The Chinese producer caused shares to tumble on Wednesday.

A spokesperson for South Korea’s SK Innovation said that they have long-term supply agreements with metal producers and suppliers so no immediate impacts on nickel supplies.

An official from a South Korean battery maker, who refused to identify the issue because it hasn’t released a statement, explained that they source nickel from many countries, including Australia, and so the impact is “very limited”.

According to both officials, the two companies are closely watching the developments following LME’s strange move.

Cui Dongshu (secretary-general, China Passenger Car Association) stated that the recent nickel surge has not affected the supply chain for EVs because Indonesia, other countries, and Russia have the biggest nickel mines.

According to a Benchmark Mineral Intelligence estimate (BMI), Russia supplies only 5% of world nickel production, but 5% of all high-grade nickel.

The metal’s prices rose even before Russia invaded Ukraine. This was due to SK Innovation, its compatriots LG Energy Solution and Samsung (KS) SDI. Also, China’s CATL and Japan’s Panasonic (OTC) increasing their production in order to keep up with growing demand.

The Nickel price rose by 25% over the past year. However, prices for nickel were higher than usual before February 24, which was a major invasion.

Graphic: Nickel Prices surge: https://fingfx.thomsonreuters.com/gfx/ce/gdpzybajdvw/MicrosoftTeams-image%20(5).png

Many battery manufacturers have long-term agreements.

For instance, last year, LGES bought a 4.8% stake in China’s Greatpower Nickel & Cobalt Materials and signed a six-year contract with the company to source 20,000 tonnes of nickel starting in 2023.

Some sources in the industry believe that rising costs over the long-term could be detrimental to automakers. These companies are already struggling with an acute shortage semiconductor chips.

A U.S.-based board member from a supplier of battery materials said that “it depends on how long the ultra high price will stay,” but declined to identify themselves as they aren’t authorized to talk to media.

The nickel suppliers would have no other choice than to demand that customers agree to a revised price if the current trend continues. They may always invoke the clause of force majeure within their contracts. It is hard to imagine a conflict like this.

This story has been corrected at paragraph 15.