(Yicai Global) Jan. 24 -- The price of nickel futures reached an all-time high in Shanghai over the weekend, as the metal is an essential raw material for electric car batteries and sales are booming. Even though new energy vehicle subsidies are set to be scrapped this year, there is no sign of demand dwindling anytime soon, analysts said.

The most active nickel futures contract closed up 2.3 percent on the Shanghai Futures Exchange on Jan. 22 at CNY180,780 (USD28,542) per ton, a new record. The price of the much sought-after raw material has jumped 18 percent in Shanghai since the beginning of the year, and 60 percent over the last three years. In London, nickel futures reached USD24,028 a ton at the weekend, the highest since August 2011.

China topped global NEV sales for the seventh straight year last year, shifting 3.52 million units. Surging demand for the autos and their batteries has pushed up the prices of key metallic raw materials, such as nickel, cobalt and lithium.

Sales are expected to top six million units this year and this will continue to support nickel prices, Chen Wenting, analyst of non-ferrous metals at S&P Global Platts, told Yicai Global.

And yet, this year state subsidies are set to end. China will cut NEV purchase subsidies by 30 percent from the start of 2022 and completely remove them by the end of the year, the finance ministry and other authorities said on Dec. 31. The sector no longer needs government support as sales are robust, it added.

To deal with the change, Tesla has raised the prices of its Model 3 and Model Y by CNY10,000 (USD1,570) and CNY21,000 respectively. FAW-Volkswagen Automobile, a joint venture of Germany's Volkswagen and China’s FAW Group, hiked those of its ID.6 Crozz and ID.4 Crozz by CNY5,400 and Shenzhen-based BYD is increasing its prices by up to CNY7,000.

This round of price hikes will not last long, said Cui Dongshu, secretary-general of the China Passenger Car Association. China’s NEV market is still expanding rapidly and the increase in scale will help reduce production costs.

The market has low-inventory expectations for nickel so there is a certain degree of resilience which will deflect part of the pressure from the price hikes, said Cao Yang, chief non-ferrous metal analyst at Orient Futures.

Editors: Xu Wei, Kim Taylor