The halving of China’s new energy vehicle (NEV) subsidies will have a positive impact on the production of lithium-ion phosphate (LFP) batteries in the short term, but nickel-cobalt-manganese (NCM) lithium-ion battery development will benefit in the long run, delegates heard at Fastmarkets’ Battery Materials conference in Shanghai on Thursday April 11.
For the latest Chinese NEV subsidy policy announced in late March, the value of the subsidies has been halved to 18,000 yuan ($2,680) for EVs with a driving range of 250-400km and 25,000 yuan for those at or over 400km. This is in comparison with 34,000 yuan for EVs with a driving range of 250-300km and 50,000 yuan for those at or over 400km as specified in last year’s subsidy policy.
“However, the subsidy policy and dual credit policy only provides incentives to those who produce EVs with higher driving range and energy density which LFP batteries cannot satisfy. In other words, current Chinese policies are in favor of NCM lithium-ion battery in the medium-to-long term,” Chen said.
The dual credits policy, formally introduced in April 2018, is made up of a corporate average fuel consumption (CACF) credit and new energy vehicle (NEV) credit that set standards for both fuel consumption and production and sales of EVs respectively. The higher the driving range of the EVs produced, the higher NEV credits car makers would get.
Impact on battery chemicals
Current Chinese policies encourage the production of EVs with higher energy density, which in return, is boosting demand for nickel-rich NCM lithium-ion batteries, according to Chen.
“The demand for nickel and lithium per EV will continuously rise, meanwhile, that for cobalt will gradually decline,” Chen said.
The resulting pressure on the price of cobalt sulfate, a key battery raw materials, became apparent as early as in the second quarter of last year when the 2018 subsidy policy already prioritized and encouraged the production of nickel-rich batteries.
Fastmarkets assessed the cobalt sulfate, Co 20.5% min, China price at 65,000-68,000 yuan per tonne ex-works on December 28, 2018, down over 50% from the historical high of 145,000-150,000 yuan per tonne on April 11, 2018.
That said, the consensus ahead of the conference among market participants was that the immediate negative impact on the cobalt sulfate price as a result of 2019 NEV subsidy policy will be limited, thanks to upticks in the international cobalt benchmark price, which is used by cobalt sulfate refineries to calculate cobalt raw material import costs.
Fastmarkets’ Chinese cobalt sulfate price jumped to 50,000-53,000 yuan per tonne on April 10, up from a nearly two-and-half-year low of 45,000-47,000 yuan per tonne on March 27.
At the same time, Fastmarkets’ standard-grade cobalt price rose to $15.30-16.75 per lb on April 10, from $13.30-14.20 per lb on March 22, the lowest level in the past two and half years.
The standard-grade cobalt prices rose on Wednesday on continued restocking by buyers who have encountered newfound metal tightness into the second quarter of this year.