Nickel at $100,000 a ton is evidence of a financial squeeze more than one related to the underlying commodity. It still illustrates the risks associated with the bets on green energy now piling up in investors’ brokerage accounts.
Renewable-energy stocks have been among the few gainers in the rocky markets since Russia invaded Ukraine, in keeping with the energy sector more generally. Wind turbine maker Vestas Wind Systems, for example—the largest stock in the S&P
Index—has risen 37% since hitting a 20-month low two weeks ago. There has been strong buying of clean-tech stocks from individual investors, according to data provider VandaTrack, though interest remains far lower than it was at the start of 2021 following President Biden’s election victory.
Demand for renewable-energy installations is only going to get stronger as Europe moves to wean itself off Russian gas. Shares in wind-turbine makers specifically were also relatively cheap after a disastrous 2021 that made clear their acute exposure to supply-chain bottlenecks and cost inflation. Vestas peer Siemens Gamesa Renewable Energy replaced its boss last month after three profit warnings.
The problem with buying stocks such as Vestas or Siemens Gamesa is that last year’s problems haven’t gone away and in fact will only be aggravated by the war in Ukraine. The companies may get more orders, but fulfilling them profitably is the real challenge. European benchmark prices of steel, the key component of wind turbines, were starting to fall from last year’s record highs until war broke out. Both Russia and Ukraine are exporters of steel products and raw materials such as coking coal and pig iron.
Nickel is a vital ingredient of electric-vehicle batteries, another focus of renewable-energy investors. While the wild jump in its price on the London Metal Exchange this week was mainly a financial phenomenon created by short-covering in China, it followed a rally triggered by sanctions on Russia. From its base in a former penal colony in Siberia, mining giant
supplies about a fifth of the world’s high-purity “Class 1” nickel used in battery cathodes. The LME is now closed to allow for orderly settlement of trades, but when it reopens prices are likely to remain elevated: The benchmark nickel price was at a 10-year high even before the war.
That will make it more expensive for big battery makers such as
and
Contemporary Amperex Technology Co.
to source raw materials. It will also make their negotiations tougher with EV makers such as
and
And it isn’t just nickel: Prices of cobalt and aluminum, two other key battery metals in which Russia plays a big supply role, have also jumped.
Investors haven’t piled into battery or EV stocks as they have into turbine makers: Shares in South Korea’s LG Energy have fallen 19% since their jubilant first close following a blockbuster initial public offering in January. But the sector is expensively rated and would be vulnerable to evidence that high commodity prices are slowing EV sales.
One of the paradoxes of the renewable-energy revolution is all the natural resources it will need. Cutting even parts of Russia’s vast mining complex out of the supply chain is bound to lead to bumps.
Write to Stephen Wilmot at stephen.wilmot@wsj.com
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