2019 PREVIEW: NCM811 batteries ‘not likely’ to be used in electric vehicles in 2019

The penetration of nickel-cobalt-manganese (NCM) type-811 batteries into the Chinese electric vehicle (EV) industry will be quite limited in 2019, market participants have told Fastmarkets.

Cost and safety are the two major hurdles facing the use of NCM811 batteries, which include nickel, cobalt and manganese in a ratio of 8:1:1. This is despite the application of China’s 2018 EV subsidy policy, which raised the usability threshold at which EVs would receive subsidies by requiring a longer driving range and a higher energy density, and in turn encouraged the adoption of nickel-rich batteries for EV applications in the country.

“I don’t think any EV producers are ready to start using NCM811 batteries in their cars,” a battery materials producer said.

“We have seen NCM811 battery used in consumer electronic products. However, not a single pack of NCM811 batteries has been applied to EVs yet,” a second battery materials producer said.

Battery types which use less nickel, such as NCM523 (nickel:cobalt:manganese in a ratio of 5:2:3) and NCM622 (nickel:cobalt:manganese in a ratio of 6:2:2) are likely to prevail in the EV industry in 2019, even though the persistent strength of cobalt prices from late 2016 until early 2018 forced battery manufacturers last year to focus on innovations in nickel-rich battery types.

Since mid-April, however, the price of cobalt has shown a significant downtrend, which accelerated in June-July and November-December.

Fastmarkets’ standard-grade cobalt benchmark price, which serves as a basis for Chinese cobalt producers to calculate raw materials import costs, moved up quickly after 2016, reaching a 10-year high at $43.70-44.45 per lb in April 2018.

It then dropped quickly during most of the remainder of the second quarter and into the middle of the third quarter, reaching $33.00-33.60 per lb at the end of August.

After a modest recovery in September, the price started to fall again in mid-November and had dropped to $26.50-28.00 per lb by the end of December, after several falls ahead of the Christmas-new year holiday on suppliers’ urgency to destock by the year-end.

The price dropped further on January 4, to $25.75-27.25 per lb.

Similarly, the price for Chinese cobalt sulfate, a key material in the production of NCM battery types, climbed to a multi-year high of 145,000-150,000 yuan ($21,164-21,894) per tonne on April 11, according to Fastmarkets’ assessments.

The price has softened since then, and was assessed at 65,000-68,000 yuan per tonne on January 4.

Over the same period, an increasing number of market participants realized that the obstacles to the technological innovations which would enable NCM811 batteries to function safely in electric vehicles have not been completely conquered, and are not likely to be resolved in the near-term.

“[Due to immature technology, the] current NCM811 battery is not likely to be applied in EVs at the current stage [of development], in addition to the [complications created by] falling cobalt prices,” a third battery materials producer said. “Instead, the market is concentrating on the production and further development of the NCM622 battery.”

As evidence of this, the producer noted that it received more orders for NCM622 lithium-ion battery materials in the second half of last year than in the first half.

Less cobalt may not mean lower production costs
One of the motives behind battery makers’ attempts to develop nickel-rich batteries and to reduce cobalt usage was to reduce production costs. But after almost a year spent developing the NCM811 battery, the market has come to accept that the production cost for this type is still much higher than for NCM622 or NCM523 batteries, despite the significant reduction in the price of cobalt.

The price premiums that lithium hydroxide carried over lithium carbonate last year largely added to the overall production costs for NCM811 lithium-ion battery materials.

NCM811 lithium-ion battery materials require the use of lithium hydroxide in the production process, rather than the lithium carbonate that is used to produce NCM622 and NCM523 equivalents. This is because the latter types are not able to withstand the same high temperatures that the former must go through during the sintering process.

The announcement of China’s EV policy early last year created an expectation of wider use of nickel-rich batteries in the EV industry. But since then, lithium hydroxide has constantly been sold at higher prices in the spot market than lithium carbonate, with the price gap widening.

Fastmarkets assessed the spot price of lithium hydroxide monohydrate, min 56.5%, battery grade, ex-works China, at 100,000-110,000 yuan per tonne on December 27. On the same date, the price for lithium carbonate, min 99.5%, battery grade, ex-works China, was 75,000-83,000 yuan per tonne, reflecting a gap of 26,000 yuan per tonne. The gap was at its widest in October when lithium hydroxide traded at prices 39,000 yuan per tonne higher than lithium carbonate.

Production of NCM811 lithium-ion battery materials also requires higher investment in sinter processing and environmental protection, according to market participants.

“Unlike NCM523 or NCM622 lithium-ion battery materials, NCM811 lithium-ion battery materials require oxygen in the sintering process, which adds more than 10,000 yuan per tonne to the processing costs,” the second battery materials producer said.

“Besides, to produce NCM523 and NCM622 lithium-ion battery materials, you only need to sinter once, but for NCM811 lithium-ion battery materials, you have to sinter two or three times, which again results in extra costs,” he added.

Overall, the production cost for NCM523 and NCM622 lithium-ion battery materials from their precursor materials is around 20,000 yuan per tonne. The equivalent cost for NCM811 lithium-ion battery materials is currently at least 50,000 yuan per tonne, market participants told Fastmarkets.

“Even if cobalt prices rebound in 2019,” the third battery materials producer said, “given the current cost for lithium hydroxide and other production costs, producing NCM622 batteries is still more economically practical than NCM811 batteries.”

Fastmarkets changed the names of its benchmark in-warehouse Rotterdam cobalt price assessments on January 2, 2019. The name “standard-grade” has replaced the name “low-grade.” The name “alloy-grade” has replaced the name “high-grade.” Click here for further details about the name changes and consultation process.