Carmakers face soaring metal costs with Russian supplies at risk

LONDON, March 8 (Reuters) – Saving up for a new ride? Better start putting more cash aside.

Russia’s invasion of Ukraine is ramping up the price of metals used in cars, from aluminium in the bodywork to palladium in catalytic converters to the high-grade nickel in electric vehicle batteries, and drivers are likely to foot the bill.

While metals have not been the target of Western sanctions yet, some shippers and autoparts suppliers are already steering clear of Russian goods, putting more pressure on carmakers already reeling from a chip shortage and higher energy prices.

“So what happens from here?” asked Carlos Tavares, chief executive of Stellantis (STLA.MI), the world’s fourth-biggest automaker, when speaking to reporters last week.

“First, what happens is that we have an escalation of cost that comes from raw materials and energy that is going to put more pressure on the business model,” he said.

Aluminium and palladium both hit record highs on Monday while nickel , which is also used to make stainless steel, crossed the $100,000-a-tonne level for the first time ever on Tuesday. read more

Andreas Weller, chief executive of Aludyne, which makes aluminium and magnesium die-cast parts for automakers, said his European business has seen a 60% rise in the cost of aluminium over the past four months, as well as soaring energy bills.

With annual sales of $1.2 billion and a surge of costs in the “hundreds of millions of dollars”, Weller, whose company is based in Southfield, Michigan, said he has been forced to ask customers to pay more than the prices already agreed.

“Some are more understanding and cooperative than others, but we cannot survive without that,” Weller, who has four foundries and one machining plant in Europe, told Reuters.

Stellantis chief executive Tavares said an end to the chip shortage could help carmakers offset higher metal and energy prices, but he did not expect any resolution to the semiconductor issues this year.

‘WE QUIT’

Consumers are already paying for the chip shortage as it has pushed car inventories down and prices up – even before higher metals prices feed through to the forecourt.

According to consultancies LMC and J.D. Power, the average transaction price for a new vehicle in the United States was $44,460 in February, up 18.5% from the same month in 2021.

German carmakers such as Volkswagen (VOWG_p.DE) and BMW have already been hit by Russia’s invasion of Ukraine as it has forced makers of wire harnesses in the west of the country to halt production. A wire harness is a vital set of parts which neatly bundle up to 5 km (3.1 miles) of cables in the average car – and Ukraine is a key supplier. read more

And when it comes to metals, Russia companies are major suppliers to Germany. In 2020, they accounted for 44% of Germany’s nickel imports, 41% of its titanium, a third of its iron, and 18% of its palladium.

With production of 108 million tonnes last year, Russia…