Electric Vehicle Battery Growth Supports Cobalt and Lithium Demand

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Wednesday, June 20, 2018 12:39 PM /Fitch Ratings
 

Wider hybrid and electric vehicle (EV) adoption should support demand for cobalt and lithium, Fitch Ratings and CRU say. However, CRU expects demand for cobalt to be lower than many market participants' expectations from 2025 onwards due to the faster adoption of lower cobalt-intensive types of batteries. 

Developments in battery technology and rates of adoption are likely to affect demand for individual commodities. 

CRU's battery materials forecast is based on assumptions of annual increases of 22%-24% in hybrids and EVs between 2017 and 2030. This is supported by a healthy uptake in China, but also other in countries such as the UK and France, where internal combustion engine vehicles are expected to be banned by 2040. 

EVs will add 50% to overall demand for cobalt between 2017 and 2025, according to CRU's base case. Many market commentators expect demand for cobalt to exceed its supply due to battery growth. However, the faster adoption of lower cobalt-intensive lithium-manganese-cobalt-oxide (NMC, in particular NMC532, NMC622 and NMC811) and lithium-nickel cobalt-aluminium-oxide (NCA) batteries could temper cobalt demand growth from 2025 onwards. CRU's forecast is lower than ranges expected by some market analysts, who predict manifold cobalt demand increases. 

CRU's proprietary model assumes that NCA remains the cathode of choice for Tesla vehicles. Furthermore, it incorporates recent technological advancements that have allowed Panasonic to cut the cobalt content for its NCA batteries to just 3%-4%, from the average 7%-8%. Similarly, several manufacturers including LG Chem and Samsung have announced plans to start producing NMC batteries with less than half of the cobalt content of other NMC batteries. Most mined cobalt supply is likely to continue to come from the Democratic Republic of the Congo until the mid-2020s. Beyond 2030, CRU expects battery recycling to be a major contributor of cobalt supply worldwide. 

As battery makers increasingly favour low-cobalt cathode chemistries, demand for nickel should increase. However, the rate of demand growth will be slowed by the higher energy density of new cathode chemistries compared to their predecessors. CRU expects an additional demand for nickel of 173,000 tonnes between 2017 and 2025, or 8% of total global nickel demand in 2017. NMC batteries with particularly high nickel content are likely to support demand beyond 2025, though use of these batteries may be delayed due to their production complexity and unproven safety record. 

In contrast to cobalt and nickel, lithium intensity differs little between cathode types. CRU forecasts battery-related demand for lithium to more than double the current overall demand for the metal by 2025. While there is a sufficient number of projects to cover this demand with lithium raw materials, processing capacity for battery-quality lithium chemicals may become a bottleneck in the medium-term. 

CRU does not expect graphite to be superseded as the anode material of choice for the foreseeable future and forecasts that battery-related demand for graphite will increase by 290,000 tonnes by 2025, or around a quarter of the current overall demand. However, supply of synthetic graphite, blended with natural graphite for battery production, is inelastic and depends on volumes of high-quality oil refinement. Therefore EV demand may create shortages in synthetic graphite markets. 

While manganese is an important component in NMC battery chemistries, EV-related additional demand of 103,000 tonnes by 2025 is insignificant compared to the existing production of 16 million tonnes.

 

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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