Electric Vehicles and Batteries – The Chicken and Egg of Critical Metal Future

COMMODITY CAPERS: Every commodity-based conference needs an industry expert to provide participants with confidence and this week’s Paydirt Battery Minerals Conference did not disappoint.

Roskill principal analyst Allan Pedersen provided the energiser bunnies in the room plenty of optimism with his look at future supply and demand numbers for battery raw materials.

Hitting on a routine any number of industry analysts have delivered in recent times, Pedersen homed in on the global electric vehicle (EV) market and its upcoming contribution to the suite of battery metals and what he believes is in store.

So, which is the real catalyst for the raw material future?

EVs will be manufactured in big numbers to meet gubernatorial expectations, while lithium-ion batteries will be manufactured in even larger numbers for use in other applications.

“It is no secret that the outlook for the electric vehicle industry and the associated supply chains are very promising,” He declared.

“Last year the total number of vehicles sold globally declined 21 per cent year on year while sales of electric vehicles increased 42 per cent year on year.

“The growth is partly driven by consumer sentiment, financial incentives such as increased scrap values for older cars when buying a low emission car, as well as potential penalties imposed on OEMs (Original Equipment Manufacturers) if they fail to lower the total emission profile of their fleet.

“In China incentives have included easier access to vehicle permits and the ability to use electric vehicles seven days a week where ICEs (Internal Combustion Engines) have been limited to six days a week.

“This in turn pushes OEMs to increase the number of electric models available to consumers which then increases the choice of models the consumers can buy, and the demand spiral has been kicked off.”

The big winners, of course, will most likely be lithium-ion (li-ion) batteries with manufacturers and users alike having already spent large amounts of dollars to bring their development to the current stage being unlikely to relinquish their investment by developing any new, replacement technology just yet.

“We forecast that demand growth for battery capacity will be slightly higher than growth seen in electric vehicles as the battery size in cars will also increase,” Pedersen observed.

“Overall, we forecast the growth for battery capacity to be 23.5 per cent between 2020 and 2030 to reach 2.47 terawatt hours by 2030.

“On top of the strong growth forecast in the automotive segment, we are also forecasting strong growth in stationary energy storage and motive products.

“Our forecast shows that demand by 2027 from non-electric vehicle segments is forecast to be higher than total demand today.”

So, what does all this mean for each commodity that contributes to the make up of a lithium-ion battery?

According to Pedersen EV growth and other factors will drive lithium demand leading to an increase in lithium of 19 per cent per year between 2020 and 2030.

The demand for lithium carbonate is expected to stay strong at 17 per cent per year, however the strongest growth will be in lithium hydroxide where Roskill predicts growth of 27 per cent per year until 2030.

It is thought that supply of lithium compounds will keep up with demand until the middle of the decade when a supply deficit is forecast to occur.

Unfortunately, with the current lack of enough new lithium discoveries, this deficit is anticipated to grow unless additional capacity is found and brought on stream.

Nickel has raised its head above the battery parapet of late, however much of its demand is still expected to come from stainless steel, which in 2020 accounted for 72 per cent of primary nickel demand.

With the battery interest taking a toll, this looks to be hitting more around the 57 per cent mark by 2020.

To put things in perspective, batteries accounted for six per cent of primary nickel demand in 2020 and by 2030 this will be hitting around 28 per cent.

“With the growing demand for cathodes based on high nickel chemistries the demand for suitable nickel sulphate is forecast to grow significantly,” Pedersen said.

“Demand for nickel sulphate from lithium-ion batteries is forecast at 25 per cent per year between 2020 and 2030.

“While supply is set to increase in the coming years it is possible a supply deficit could happen in the segment suited to batteries and new feedstock types and processing routes need to be considered.

“These will obviously need to be economical as well as sustainable.”

Cobalt has become the poor cousin of the battery metal family of late with constant rumours of a synthetic replacement being developed.

Mostly the phasing out of cobalt is to assuage investor concerns of the main supply coming from questionable mining and labour operation in the Democratic Republic of Congo.

Nonetheless, Roskill identified that although the intensity of use of cobalt across battery applications is forecast to decrease, total units required will still increase sharply driven by the growing market size.

Mining in the DRC aside, cobalt demand over next decade is still forecast to largely be boosted by the EV uptake and steady growth in portable electronics industry.

“With LFP (lithium iron phosphate batteries) taking a larger part of the market and high nickel battery chemistries aiming to reduce the cobalt needed, it does not eliminate the need for cobalt all together,” Pedersen said.

“Strong growth in EV numbers will drive demand for cobalt going forward.

“Roskill forecasts cobalt demand to increase seven per cent per year between 2020 and 2030.”

Governments, particularly those of the democratically elected variety, care about what voters consider important, which means they will eventually arrive at the global de-carbonising table with policies that support the evolution of the EV industry.

This will result in driving strong global demand for critical raw materials with batteries leading the Critical Raw Materials way.

“Governments are putting in place policies to not only ensure that there is sufficient raw material available for targets to be met but also that these materials are ethical and the supply security is in place to ensure that any geopolitical events will not jeopardise these targets,” Pedersen concluded.