Low-nickel NCM batteries back in favor to reduce cathode producer costs and encourage end-user demand

Some cathode makers have been switching back to lower-nickel cobalt manganese (NCM) from high-nickel NCM cathodes to reduce costs and encourage consumers amid slowing demand for electric vehicles (EVs), Fastmarkets understands

While low-nickel NCM batteries, with higher cobalt content, typically cost less than high-nickel NCM batteries, there has been a trend for battery producers to favor high-nickel NCM chemistries because of their higher energy density and longer ranges.

But recently battery producers – particularly those in China and South Korea – have been turning back to low-nickel ternary materials to reduce the cost of their batteries.

“The battery accounts for a big part of an EV’s [overall price], so now demand is slowing down, to boost the adoption of EVs, the battery costs have to be [reduced] to a certain extent,” a Chinese lithium producer source said.

A Chinese cathode producer source also told Fastmarkets that its high-nickel NCM battery cathode production had recently been cut by 25% and that priority was being given to mid-nickel NCM battery cathode production to cut costs.

Other Chinese cathode producers confirmed the shift to lower-nickel NCM production in China’s domestic markets, with one estimating that its high-nickel NCM cathode output was down by 20-30% over the past one to two months.

And in October, South Korean battery producer LG Energy Solution said in its latest earning report that it planned to strengthen its product portfolio by targeting the mid- to low-end EV segment – namely high-voltage mid-nickel NCM solutions.

In the United States, General Motor’s chief executive, Mary Barra, said: “We are moderating the acceleration of EV production in North America to protect our pricing [and we are adjusting our output to reflect] slower near-term growth in demand.

“[We will also] implement engineering efficiency and other improvements to make our vehicles less expensive to produce and more profitable,” she added.

There have been no signs of a switch to low-nickel NCM chemistry in Japan, however, where high-nickel ternary materials are still preferred.

“The strategy [to change to lower-nickel NCM] was initially adopted by China’s CATL and soon spread to South Korea,” a lithium trader in Japan told Fastmarkets, but added that they would remain watchful about the progress of the trend. 

Price war

The comeback of low-nickel chemistries coincides with the escalating price war along the EV supply chain, with market participants are racing to cut prices and grab a bigger market share on the expectation of weaker demand in the near future.

The price war among auto makers initiated by Tesla earlier this year has continued and is still exerting downward pressure throughout the supply chain. 

In the upstream battery raw materials sector, for instance, lithium prices have been mostly on a downtrend so far this year, mirroring the weak demand from battery producers.

Fastmarkets’ daily price assessment for lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price cif China, Japan & Korea was unchanged at $18-19 per kg on November 30, but down by 77.84% from $83-84 per kg on January 3.

“A severe price discounting is taking place in the Chinese EV market, especially among battery electric vehicles (BEVs). We realize that price competition between local manufacturers and foreign [original equipment manufacturers (OEMs)] is intensifying, and the discount rate for BEVs is increasing,” Toyota Motor Corp’s executive vice president and chief financial officer Toyota Yoichi Miyazaki, said in an earnings call at the start of November.

High-nickel NCM for long term?

Despite the recent changes, some international battery and cathode makers told Fastmarkets that, in the long term, they would move toward high-nickel NCM.

“The adoption of low-nickel chemistries is just temporary,” an end user in Japan said. “Ultimately, we will move toward high-nickel NCM in the long term.”

Primarily due to demand for higher driving distances for EVs, high-nickel NCM batteries are particularly more desirable in the European and US markets, where, unlike China, there are greater distances between most cities.

“High-nickel NCM batteries have higher energy density, which is more suitable for the long-distance driving need in Europe and US,” said a second Chinese lithium producer source.

“Automotive producers have both high-, mid- and low-end EV models, with the high-end models most likely equipped with high-nickel NCM batteries due to their high energy density. So I don’t think high-nickel NCM chemistry can be replaced,” a second international cathode producer source said.

Keep up to date with the latest news and insights on our dedicated battery materials market page.

What to read next
Manganese, chrome, tungsten and vanadium will be key topics of discussion at Fastmarkets' upcoming Asia Ferroalloys Conference 2024 in Hong Kong on February 26-28, after appearing on China's latest list of critical minerals
Lepidolite producers in China have been a major wildcard in the lithium industry of late, with production surging despite its higher cost, energy-intensive nature.
Financial incentives for companies developing silicon-based anodes in Europe are helping to support the sector, but the focus on innovation, not scale, risks them falling behind North America, experts told Fastmarkets.
Graphite companies Nouveau Monde Graphite, Novonix and Westwater have all announced offtake agreements in a developing US anode supply chain to comply with that country’s generous subsidy scheme under the Inflation Reduction Act and to ease the current dependence on China for material, Fastmarkets heard on Thursday February 15
Fastmarkets’ 2024 outlook for key raw materials and ingredients used in the production and distribution of fast-moving consumer goods
Weak demand continues to stem profitability and prevent capacity return in the European aluminium market, Norsk Hydro’s chief executives told Fastmarkets in an exclusive interview on Wednesday February 14.