Lithium and Cobalt and Nickel, Oh My!

The electric vehicle market is still in its infancy but it is already driving rapidly growing demand for the raw components used to make rechargeable batteries. Add to that an expected boom in renewable energy storage, which uses industrial-scale batteries, and battery metals have a rosy future.

In this article, we look at four metals with great potential to benefit from the oncoming surge in battery demand.

Lithium

The falling price of lithium-ion batteries is fueling the rapid uptake in electric vehicles, which in turn is fueling more demand for lithium-ion batteries. According to BloombergNEF, the volume-weighted average lithium-ion pack price fell, in real terms, from US$1,160 in 2010 to $176 by 2018. During the same period, the size of the global EV fleet grew from a negligible amount of just a few thousand to around 5.1 million.

BloombergNEF expects annual passenger EV sales to rise to 10 million in 2025, 28 million in 2030, and 56 million in 2040. The International Energy Agency is even more bullish, predicting a best-case scenario of 43 million global EV sales in 2030–bringing the global EV fleet to around 250 million. The IEA’s low-case scenario is for 23 million sales in 2030, bringing the global fleet to 130 million.

Lithium-ion stands to benefit the most from the expected EV boom. That’s because lithium-ion remains the clear favourite among EV manufacturers for use in rechargeable batteries. As Swiss Resource Capital has pointed out, the name “lithium-ion battery” is a generic term for a series of possible chemical structures, including lithium-cobalt batteries, lithium-manganese batteries, and lithium-iron-phosphate batteries. The other metals are replaceable. The lithium is not.

As of 2015, rechargeable lithium batteries accounted for 39% of lithium consumption, and this figure will only grow. Overall demand for lithium has grown 13% per year since 2015, according to Roskill. The consultancy says demand from rechargeable batteries exceeded 144kt of lithium carbonate equivalent in 2018 and it predicts this will increase more than six-fold by 2028.

Cobalt

Consumer electronics, mainly lithium-cobalt, accounted for 25% of cobalt demand in 2017, according to McKinsey. The global consulting firm foresees a 60% increase in demand between 2017 and 2025, from 136 kilotons to 222 kilotons refined metal equivalent. Rival consultant Wood Mackenzie is even more bullish on cobalt, predicting demand will double by 2025.

The risk for cobalt is that EV manufacturers will get scared by where it is sourced. An estimated 58-65% of global cobalt supply is a by-product of copper and nickel mines in the Democratic Republic of Congo, a country notorious for high political risk and low transparency. China, Canada, Russia, and Australia are the other big producers.

As Capital 10X has noted, Ford has joined with several partners to monitor the movement of cobalt from the DRC to the lithium-ion batteries used in its EVs. Tesla, the world’s second-largest EV manufacturer after Renault-Nissan, is planning to use less cobalt in battery cathodes, Tesla’s global supply manager for battery metals reportedly said in a closed-door meeting with a group of miners and lawmakers.

Nickel

At present, only about 6% of nickel goes into batteries, with 70% going to stainless steel. But if vehicle manufacturers move away from cobalt, nickel stands to benefit the most. According to the Reuters report mentioned above, Tesla is planning to focus more on nickel as part of its plan to reduce cobalt consumption. Nickel is mined in much larger quantities than cobalt and in a wider variety of places, with the largest producer Indonesia, accounting for about one-quarter of mine production in 2018.

In a separate scenario, nickel and cobalt demand could grow in sync with one another. Western Areas, one of Australia’s largest high-grade nickel producers, has reported a significant increase in off-take inquiries for nickel sulfide concentrate. It attributes this to increased interest in nickel-cobalt-manganese (NCM) type-811 batteries.

Research has shown this will be the fastest-growing battery combination by 2025. Until then, growth may be slow. According to Fastmarkets, electric vehicle producers in China – the world’s largest EV market – will shy away from NCM batteries in 2019 due to cost and safety concerns.

Vanadium

Vanadium is lesser-known among battery metals, and with good reason: the steel industry accounts for about 90% of consumption. But the silvery-blue metal, named for Vanadis, the Nordic goddess of beauty, has been attracting interest for another reason — its potential to power batteries used in energy storage.

Lithium-ion batteries are the dominant player in energy storage, but vanadium-flow batteries last longer and can be charged and discharged without dropping in performance. Swiss Resource Capital has pointed out that decentralized storage facilities, which are needed to help wind and solar power achieve base-load capacity, will experience a similar boom as EVs. According to IHS Markit, 4.3 GW of grid-connected batteries will be deployed worldwide in 2019, a figure which will more than double to 10.6 GW by 2025.

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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Nadav Shemer
Nadav Shemer is a writer, researcher, and analyst specializing in mining, energy, innovation, and consumer finance. While at Mining Journal, he compiled the publication's inaugural list of the world's top 100 mining companies by revenue and reported on visits to mine sites in the U.S., Africa, and Europe. He has also worked at FCBI Energy, where his publications included a series of white papers on decommissioning of North Sea oil rigs and reports on petrochemicals construction costs. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.
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