Automakers "want to tears first": forget the lack of core crisis, aluminum-nickel-palladium are all lacking in all rising!

Financial Associated Press (Shanghai, editor Xiaoxiang) news, planning to save money to buy a new car? You'd better save more money first...

As the Russian-Ukrainian conflict further pushes up the price of automotive metals, from aluminum in the car body, to palladium in catalytic converters, to high-purity nickel in electric vehicle batteries, almost everything is now rising. While the metals sector has yet to be the target of Western sanctions against Russia, some shipping companies and parts suppliers have begun to steer clear of Russian goods, putting more pressure on automakers already struggling with chip shortages and rising energy prices. And all this, in the end, will require car buyers to "pay" for this.

Carlos Tavares, chief executive of Stellantis, the world's fourth-largest automaker, asked himself in an interview last week, "What happens next?" First and foremost, rising raw material and energy costs will put more pressure on business models. ”

With Western sanctions against Russia likely to directly involve exports in the energy and even commodity sectors, the price of aluminum and palladium hit record highs on Monday, and even crazier is the price of nickel, known as "demon nickel" — the metal used to produce stainless steel surged by about 70 percent on Monday and surged 100 percent on Tuesday to break $100,000 a tonne, a record high.

Andreas Weller, CEO of Aludyne, which makes aluminum and magnesium die castings for automakers, said aluminum costs for its European operations have risen 60 percent in the past four months, as well as energy bills.

Headquartered in Southfield, Michigan, the company has annual sales of just $1.2 billion, and costs have soared to "hundreds of millions of dollars." Weller said he had to ask customers (automakers) to pay higher prices than the already agreed selling price.

"Some companies will understand our request for a price increase because we really can't survive without a price increase," Weller said. The company has four foundries and one machining plant in Europe.

Before metal prices rose, automakers and consumers were already plagued by a crisis of missing cores. Stellantis CEO Tavares said the end of the chip shortage could help automakers offset the impact of rising metal and energy prices, but he doesn't expect any solution to the lack of cores this year.

According to consulting firms LMC and J.D. Power, the average transaction price of a new car in the U.S. was $4.446 million in February, up 18.5 percent from the same period last year.

Is the Russian-Ukrainian conflict wreaking havoc on the automotive industry?

German automakers such as Volkswagen and BMW have been hit by the Russian-Ukrainian conflict, which has shocked the world and is forcing wiring harness manufacturers in western Germany to stop production. The harness is a vital set of components that can neatly bundle cables up to 5 kilometers in a regular car, and Ukraine is a key supplier of wire harness components for these car companies.

When it comes to specific metals, Russia is arguably the main supplier to German car companies. In 2020, Russia accounted for 44% of Germany's nickel imports, 41% of titanium, 33% of iron ore and 18% of palladium.

Russia, which produced 108 million tonnes of iron ore last year, is the world's fifth-largest producer of iron ore, according to Credit Suisse, which supplies European steelmakers, who are currently facing higher prices and may struggle to source the ferrous metal. Russia is also a key supplier of aluminum, accounting for 6% of global production.

Automakers have also been battling the price of nickel, which has gone mad. Caspar Rawles, chief data officer at Benchmark Mineral Intelligence, a consultancy, said that while Russia produces only 5 percent of the world's nickel, it supplies 20 percent of the world's high-purity nickel.

The metal is used to produce batteries for electric vehicles, posing a new challenge for automakers looking to accelerate the electrification transition. At a time when demand for zero-emission models is soaring, these automakers have invested billions of dollars in electric vehicles. Batteries are one of the most expensive components in electric vehicles, and automakers have long wanted batteries to become cheaper so they can offer more affordable electric vehicles to consumers.

"This is becoming a major concern in the battery supply chain because lithium prices have now hit record highs and cobalt and nickel prices are also very, very high," Rawles said. "This will only exacerbate the shortage of battery minerals."

BMW has said it is focusing as much as possible on recycling battery nickel, with up to 50 percent of the scrap nickel used in the high-voltage batteries of its new BMW iX model.

Finally, in the palladium space, automakers are also in trouble. Palladium is commonly used in the automotive industry as a catalyst converter for gasoline models. The price of palladium has been rising for about six years before, and Russia accounts for about 40% of global palladium production.

Chris Blasi, CEO of precious metals trader Neptune Global, said, "There is no alternative to using palladium and platinum as catalytic converters, and without a catalytic converter, you can't produce a car." He said he bought a large amount of palladium last December at $1,940 an ounce. On Monday, the price of palladium reached a record $3433.

Blasi estimates that the cost of palladium on an average car is about $200, but it's easy to double right now. "Either consumers will pay more for cars or automakers will have to seek cost savings from elsewhere," he said. ”