The London Metal Exchange halted nickel trading after the metal price surged 250%. Yahoo Finance's Pras Subramanian joins the Live show to discuss the impact of rising metal prices on the auto industry.

Video Transcript

BRIAN SOZZI: All right, we have been talking about this one all morning long. The London Metal Exchange halted nickel trading today after prices doubled to a record $100,000 per ton. Those gains were powered by a frenzy to cover short positions, as Julie mentioned earlier in the show, after Western sanctions threatened supplies from major producer Russia. This move could have a profound effect on EV makers.

Yahoo Finance Senior Auto Correspondent Pras Subramanian is here with more. Pras, I'm a little bit surprised because we are not seeing some of these EV makers, like a Tesla, like an Xpeng, really get slammed here in the early going of today's session on this. But let's not pull any punches. This is a big risk to their operations moving forward.

PRAS SUBRAMANIAN: You know, Soz, we saw some moves downward on these EV makers. And I think a little bit is that pressure on mounting input costs, right, with regards to stuff like nickel, which we just saw today limit up at the London Metals Market here, excuse me-- $100,000 a ton. You know, this follows yesterday's move of 44%, which was a 250% move over the last two days, the largest-ever move seen at that metals market.

A lot of traders here trying to buy up supplies, as you mentioned, concern over Russian supplies possibly going offline. You have a lot of traders and investors who are also hedging their position with short contracts. Price goes up a lot, you got to cover with more collateral. You get the picture.

Now nickel, as you mentioned, is used to make stainless steel, but also it's a big component of EV batteries. Russian miner Norilsk Nickel is the world's largest producer of nickel. They make around 17% of the top-grade nickel in the world. Morgan Stanley said in a note that this threat is a "genuine concern," quote. They said, "Commodities markets are increasingly pricing in a scenario under which a significant portion of Russian supply will be excluded from the market." They go on. "Prices are likely to remain highly volatile until the real supply impact becomes clear and prices can start to settle at a new equilibrium."

So as car companies around the world ramp up EVs and need more and more batteries, they're going to get crunched here, too. And Soz, you mentioned, it's not just nickel. It's stuff like aluminum and palladium that come from Russia, as well.

I spoke to Stellantis CEO Carlos Tavares last week and he echoed the concern that rising metal prices are going to put pressure on the business. And for EVs, batteries are one of, if not the, most expensive part of the car. Add that to the chip shortage that is still ongoing, as well as the fact that supply has been decreased over the past year and a half, and these new rising metal costs. It seems like new car costs or new car prices will be elevated for quite some time to come.

JULIE HYMAN: And on the semiconductor shortage, as well, we learned this week from one of the traders we spoke to that Ukraine is a big maker of neon, which is apparently integral in the semiconductor-making process. So it sounds like the semiconductor shortage is going to get worse, as well.

It's so interesting to me, Pras, because on the one hand, at times that you see gasoline prices going up, that tends to give a boost to things like electric vehicle demand. But in this dynamic, if people, A, aren't going to be able to get the cars, and B, have to pay a lot more for them, you wonder if you will still get that kind of effect that we have seen over the past several years.

PRAS SUBRAMANIAN: Yeah, it makes you really question the EV wave that everyone says is going to happen the next few years. If you can't really produce these EV cars in a quantity that makes any sense, in terms of changing the dynamic of the mix of cars on the road, you have to go back to gas-powered cars. But, well, guess what? Gas prices are going high. Palladium and aluminum costs are also high.

And then also you mentioned stuff from Ukraine. Ukraine also makes a lot of the wiring harnesses for cars. That's a critical component for every car. Every car needs that wiring harness. Ukraine is one of the major suppliers of that piece. So add that to the mix, and you can't even get enough gas-powered cars to meet demand, let alone EVs at this point.

BRIAN SOZZI: Pras, I don't mean to make light of this. But I tweeted a photo out over the weekend, about a $100,000 Toyota RAV4, that with a $40,000 dealer markup, in large part because of the short supply and inventory. The auto market's getting out of hand.

PRAS SUBRAMANIAN: Yeah, Soz. I often really wonder-- you know, from my understanding, the market in the US is a lot of older cars on the road, still on the road, and people are desperately trying to upgrade these to newer cars. Because if you think about it-- and I also mentioned, I spoke to the Stellantis CEO about this. Newer gas-powered cars are much better for the environment in terms of the amount of CO2 they emit per kilogram.

So you really want to get people to buy newer cars, not just because they're they're better and safer, but also because they're better for the environment, even if they're gas-powered. And you're talking a $100,000 RAV4? Are you kidding me? That's insane. But that's where we are now in the market.