A Headache for Germany: Russian Nickel, Palladium, Chromium Exports

Class 1 nickel prices had already doubled over the last two years but Russia’s invasion of Ukraine prompted fears that Moscow could impose an export ban.  A trading frenzy in early March saw prices hit record highs, with the London Metal Exchange even suspending trading for a period, the first time it had taken such action in 37 years. Nickel prices have gone up 400% in 2022 alone.

Volkswagen — which has effectively staked its future on rapidly becoming an EV power — recently announced that it had struck an agreement with the Chinese companies Huayou Cobalt and Tsingshan Group for a joint venture to secure raw cobalt and nickel supply in Indonesia, one of the world’s biggest producers.

Export Bans, Import Bans
However, uncertainty over Russian raw materials will continue to stalk the market. Some analysts have predicted that the nickel crisis alone will add at least $1,000 (€919) to the costs of a new electric car for consumers.

The VDA, the trade body for German carmakers, says the war in Ukraine will lead to further disruption of vehicle production in Germany. “In the long term, the car industry is facing shortages and higher prices of raw materials,” it said in a statement.

Not only carmakers are affected. In 2018, German chemicals giant BASF joined forces with Russia’s Norilsk Nickel, the world’s largest producer of refined nickel, for a deal which would see the Russian company supply BASF’s new battery materials production facility in Finland with nickel and cobalt. Such deals are now being heavily scrutinized.

Although Moscow did not put materials such as nickel on the export ban list it released in March, there remains a chance that sanctions either from Moscow or Brussels will end the flow of such raw materials to Europe.

On Friday, the EU announced import bans on several Russian products including coal, caviar, wood, rubber, cement and vodka. However, nickel and other commodities exported in high volume to countries such as Germany were left off the list.

Small Potatoes Compared to Energy
Even if the sale of Russian nickel to Europe is not legally prohibited, the overwhelming pressure on German companies to cut business ties with Russia continues to mount in practically every sector.

Yet while myriad economic and business links between Germany and Russia die away and will continue to do so in the face of the outrage over what is happening in Ukraine, almost every scenario is dwarfed in significance by the possible consequences of an embargo on Russian oil and gas.

Many experts and business leaders have argued that Germany’s economic prosperity of recent decades has largely been built on the cheap supply of Russian energy.

BASF head Martin Brudermüller told the Frankfurter Allgemeine Zeitung that a sudden ban on Russian oil or gas could lead to an economic crisis as bad as any in Germany since World War II, and that his company would have to stop production if natural gas supplies fell to less than half the current usage.

Some disagree with such strong assessments. A study by the German National Academy of Sciences, Leopoldina, said ending supply immediately would be “manageable.”

The fact that something as stringent as an outright ban on Russian energy is being seriously debated does make one thing clear for any German business with ties to Russia, regardless of their nature: Nothing is off limits, regardless of how economically “critical” it may be.

Arthur Sullivan is business reporter at DW. This article was edited by Hardy Graupner, and is published courtesy of Deutsche Welle (DW).