A bumpy road for battery materials?

Author Mark Seddon, Senior Manager (Consulting, Metals)

In spite of optimistic forecasts for electric vehicle (EV) market penetration and strong growth in Chinese EV production, the future for vehicle electrification – and by extension, demand for battery materials – is not plain sailing.

While a number of countries have a long term target for phasing out gasoline-powered vehicles (2040 in France and the UK, for example), China is really the only country to have specific short-term targets for EV uptake and has put the regulatory and subsidy in place to achieve these aims.

The rechargeable battery industry is targeting the electric vehicle market (both pure EVs and hybrids) almost to the exclusion of other markets. Battery technology developments are geared towards EVs, with other market sectors such as energy storage likely to benefit from these developments, as well as the reduction in battery costs from increasing economies of scale.

Lithium-ion batteries would appear to be the technology of choice for EVs for the foreseeable future, with other technologies, such as solid state batteries, lithium air, lithium sulphur, fuel cells etc., unlikely to impact the market until towards the end of the next decade.

Forecasts for growth in the production and uptake of EVs range between the conservative and the wildly optimistic, but there is a market consensus that EVs will drive demand for battery materials, with a potential boom in the use of lithium-ion batteries in energy storage only adding to the potential strain on the battery materials supply chain.

Argus has forecast the market for alternative fuel vehicles (AFVs) up to 2030, split between battery electric vehicles (BEVs) and plug-in hybrids vehicles (PHEVs). According to our model, total AFV sales are forecast to increase from around 2.1mn units in 2018 to 3.2mn units in 2020, 8.9mn units in 2025 and 25.2mn units in 2030. This represents a CAGR of 23pc over the forecast period.

Using these forecasts for the EV market and the other major applications for Li-ion batteries, the overall market is expected to increase from around 125GWh in 2018 to 200GWh in 2020, 583Wh in 2025 and 1,850GWh in 2030, which would represent CAGRs of 26.5pc, 24pc and 26pc, respectively. The EV sector becomes ever more dominant, increasing its market share from 56pc in 2018 to 68pc in 2020, 84pc in 2025 and over 90pc in 2030.

The predicted growth in the lithium-ion battery industry is likely to put increasing pressure on the supply chain for battery materials, both for the cathode (lithium, cobalt, nickel and manganese) and the anode (graphite). Capacity additions are on track to ensure there is sufficient supply to meet the demands of the lithium market until towards the end of the next decade.

For cobalt, recent capacity additions should be sufficient to supply the EV battery industry until the middle of the next decade, but without further capacity expansions or new projects, the cobalt market could fall rapidly into deficit between 2025 and 2030.

Capacity for the dedicated production of nickel sulphate is limited and currently there is little incentive to commission specific projects to produce nickel sulphate (as batteries represent less than 5pc of overall nickel demand). The predicted rapid growth in EV battery production has led to some fears of a squeeze on nickel sulphate supply leading to a significant rise in the premium for battery grade nickel (on top of rising nickel metal prices).