“Electrification of [the] automotive industry is a game-changer,” Alex Iasnikov, lead chemist at Titan International, told delegates at the annual Minor Metals Trade Association (MMTA) conference last week in Montreal.
Consumer electronics have stood as the preeminent demand sector for lithium-ion batteries, but growth in demand from the automotive industry has quickly narrowed the gap and should serve as a major source of overall demand growth for the battery industry in the years ahead.
“In spite of the fact that the [consumer electronics] industry was growing at a quite healthy [compound annual growth rate] of 8-10%... it’s really the electrification of [the] automotive industry that is changing the whole picture,” Iasnikov said.
Current projections are for lithium-ion battery demand from the automotive industry to grow at an annual rate of 20-30% through 2024, according to data supplied by Albemarle.
“We can see that next year the sale of automotive batteries will be almost on par with consumer electronics, and by 2024 it will overtake the volume of the [consumer electronic] batteries,” Iasnikov said.
Global growth will be driven in large part by China’s push for an aggressive zero-emissions vehicle program.
As a result of this commitment 8% of all cars sold in China by 2018 are expected to be EVs, with that number growing to 12% by 2020.
“Given a 1% EV adoption rate in China today, that target translates to a 12-times increase in the number of EVs to be sold in China by end of the decade,” Iasnikov added.
While 500,000 plug-in hybrid EVs and battery EVs were sold in 2015, demand is forecast to grow to 2 million units by 2020 and 6 million units by 2025, according to research provided by Deutsche Bank.
Moreover, Bloomberg forecasts annual demand for lithium-ion batteries from new EV sales of 408 gigawatt hours (GWh) in 2025 and 1,293 GWh in 2030.
Stationary-storage market demand is also expected to experience noteworthy growth, with demand reaching 65 GWh in 2025 and 200 GWh in 2030, he added.
The cost of EVs has been an obstacle for increased adoption in the automotive sector, with the cost of batteries representing 48% of the total vehicle production cost in 2016, according to Bloomberg data.
But production costs for lithium-ion batteries have experienced considerable declines in recent years, making EV production more viable.
“The cost of the battery has [fallen] quite significantly. In 2010, the cost of one kilowatt hour (KwH) was about $1,000. Today it is around $175,” Iasnikov said.
This trend is expected to continue in the coming years, bringing the cost of EV production more in line with those for internal combustion engine vehicles.
“If you look at the cost of [EVs] and the cost of [the] internal combustion engine, the latter is still cheaper and it is expected we’ll get to parity by 2025 or 2026 if the cost of batteries can be kept under control,” Iasnikov said. "For this to happen, the cost of batteries have to go down by another 20-25% in the next five years.”
The cost of cobalt and nickel will factor heavily into this increased cost efficiency, with cathodes representing the most expensive part of the battery - at 22% of the total production cost, Iasnikov said, noting that nickel and cobalt account for roughly 80% of the cathode cost.
Due largely to EV growth, cobalt prices are currently near 10-year highs, which is driving a shift in battery production while manufacturers look to increase cost efficiency.
Metal Bulletin's assessment for low-grade cobalt was at $43.55-44.45 per lb in-warehouse on Wednesday April 18, while high-grade cobalt was at $43.55-44.55 per lb in-warehouse at the midweek assessment.
“[Lithium-cobalt] is the most efficient battery but it is also the most expensive battery. With cobalt prices going up, the market share is going down,” Iasnikov said.
Lithium-cobalt batteries represented 36% of total lithium-ion battery production in 2014, which is expected to decline to 26% by 2020 due to manufacturers striving to reduce production costs.
The nickel market stands to be the biggest beneficiary of the shift away from cobalt in the coming years.
Although nickel and cobalt currently each account for roughly 33% of cathode content in lithium-ion batteries for EVs, it is expected that by 2020 cobalt usage will decline to 10% of total cathode content while nickel usage is projected to balloon to 80% of total cathode content.
“It is expected that demand for nickel [in batteries] will increase by almost 50% in the next five years while demand for cobalt will grow by 4.3%,” Iasnikov said.
But for the nickel market the shift in demand is insignificant, he said, since current demand from lithium-ion batteries accounts for only 5% of total nickel consumption.
In contrast, demand from the battery industry accounted for 50% of cobalt consumption in 2016 and is expected to top 62% of total cobalt consumption by 2020, Iasnikov added.
“So obviously, that cannot keep cobalt prices low, and that explains why industry is trying to reduce the amount of cobalt in batteries and increase nickel in batteries,” he said.
Morgan Stanley’ forecasts a ramp up from 1.1 million battery [EVs] with 38 kWh battery packs in 2017 to 9.4 million [battery] EVs with 47 kWh battery packs in 2025, Iasnikov said, noting that this is expected to create a cobalt supply imbalance in the years ahead.
Meanwhile, future nickel costs could present a similar obstacle to sustainable EV growth, since only Type 1 nickel can be used in battery production. Iasnikov defined Type 1 nickel as nickel cathode with a minimum of 99.9% purity, while Type 2 nickel accounts for the rest of the nickel market.
Refined nickel supply is declining because growth of nickel pig iron (NPI) production resulted in a decline in nickel prices, and this trend will continue, he said.
A crunch in Type 1 nickel supply is expected sometime between 2023 and 2025, and most likely that is when we will have two types of nickel priced differently, according to Iasnikov.
Type 1 nickel demand is expected to reach 167,000 tonnes per year by 2025, representing a 138.6% increase from the current level of 70,000 tonnes per year, according to data supplied by Cairn Energy.
“The price of Type 1 nickel will go up, which means in order for EV business to be sustainable the price needs to be under control,” Iasnikovsaid.
In order to manage prices and prevent supply imbalances, the lithium-ion battery industry must be able to rely on battery recycling. But a few hindrances currently exist.
A major factor in battery recycling is the potential environmental impact, Iasnikov noted, which is related to the fact that batteries can explode at high temperatures, they contain heavy metals that can be leached out if put in the ground and the electrolyte that is used in batteries is toxic and flammable.
"From this standpoint, we are talking about a green EV or a green electrical industry [that] won’t exist until we create a closed loop. Otherwise it is not really [green],” he said. "If we start putting [batteries] in the ground it will basically lead to environmental disaster.”
A second major barrier that battery recycling faces is the economic effect, since EVs are not currently economical versus internal combustion engine vehicles.
“The only reason this industry exists is because of government subsidies and different government programs that are pushing for this,” Iasnikov said. “At some point in time, the industry should become self-sufficient without government subsidies, and keeping [down] the cost of lithium batteries - and especially cathode - is critical for sustainable growth of the electrical car industry.”
Capacity issues will similarly provide a barrier to the viability of battery recycling, since currently there are only 22 companies involved in the recycling of batteries - with a total world capacity of 70,595 tonnes per year, according to Iasnikov’s data.
This capacity will be filled quite quickly when batteries form electric cars start coming to the recycling world, he added.
“Recycling is difficult for the battery industry, but this is the only way to keep nickel and cobalt at a reasonable amount where the industry can afford to buy,” Iasnikov added.
The growing adoption of electric vehicles (EVs) throughout the automotive industry will force a significant shake-up in the lithium-ion battery industry in the coming years.