WEBINAR: Market diversity demands different battery chemistries but nickel-rich cells to hold dominant position

Diversified downstream requirements on costs and performance will point to the need for different battery chemistries, but in the long run, nickel-rich batteries will dominate the electric vehicle (EV) market, delegates heard during Fastmarkets’ “A critical look into the impact of Covid-19 on cathode materials” webinar on Tuesday July 21.

Most of the new demand for EV batteries last year were for those with high-nickel chemistries, but the lithium iron phosphate (LFP) battery has experienced a resurgence in favor among original equipment manufacturers (OEMs) so far this year, Jingwen Sun, executive director of equity research at Minmetals Securities, said.

Markets with varied priorities will require different battery chemistries, Sun said during the panel discussion. The main priorities for EV battery producers include long driving range, which nickel-rich batteries will satisfy, and low cost, which manufacturers can most easily achieve by using LFP batteries, he added.

Raw material prices are a crucial factor for market adoption, thus LFP batteries are likely to hold a dominant market share in the cost-sensitive energy storage system (ESS) market, and OEMs are also likely to consider such batteries in some of their next generation models, especially for commercial vans and those with short ranges, Sun told delegates.

Cobalt and nickel prices have been relatively volatile so far this year with both displaying some fresh momentum recently on short-term supply disruptions and long-term positive fundamentals respectively.

Fastmarkets’ price assessment for cobalt sulfate 20.5% Co basis, exw China has risen for the fifth consecutive pricing session to 46,000-47,000 yuan ($6,573-6,716) per tonne as of July 24, up 5.7% from the beginning of July. 

Fastmarkets’ cobalt hydroxide payable indicator, min 30% Co, cif China edged up to 70-73% of it standard-grade cobalt price on July 24, continuing to refresh the historical high since the assessment was launched in January 2019.

Meanwhile, the daily official three-month nickel contract on the London Metal Exchange climbed up to $13,567 per tonne on July 14, hitting nearly a six-month high. The price retreated slightly to $13,465 per tonne on July 24.

“We estimate 40% of the EV industry-related market share in China will be dominated by [LFP batteries], and the rest will be dominated by the high nickel [battery],” Sun estimated.

He also added that the market in Europe and the United States will also slowly to adopt the LFP battery in the future.

NCM battery remains the main force
Despite the recent rise in Chinese LFP battery-driven car models, panelists broadly believe nickel-cobalt-manganese (NCM) battery are still dominating the EV battery sector.

China produced about 10,000 tonnes of LFP battery materials and 20,000 tonnes of NCM precursor materials in June, Denis Sharypin, head of market research of Norilsk Nickel told the delegates, citing data he has seen.

He also pointed out that the increase of LFP battery installed capacity recently is not completely driven by OEMs shifting to LFP batteries in EVs, but also due to stationary applications and fifth generation (5G) network development.

The installed capacity of LFP batteries rose to about 1.68GWh in June in China, up by 105.96% month on month, according to the power battery application branch of China Industrial Association of Power Sources data.

“We don’t see any supply chain of LFP [batteries] in the Europe or United States… The majority of OEMs and battery manufacturers are still targeting the high-nickel battery,” Sharypin said.

Julie Liang, deputy director of the board office of CMOC echoed Sharypin, adding that when making plans for EVs OEMs need some time to think about the battery technology path because it is difficult to change direction in the short term due to the high associated costs.

Nickel-rich battery to hold dominant position
The nickel-rich NCM battery will hold the dominant market share in the future in light of OEMs targeting models with high driving range and cutting exposure of cobalt, panelists said.

Battery manufacturers are less worried about consumption weakness resulting from Covid-19 than raw material supply disruptions and price volatilities, which affects their normal production and cost control, according to Liang.

In addition, due to the instability of cobalt supply and the high concentration of cobalt supply in the Democratic Republic of Congo (DRC) – which contributes nearly 70% of global output – where there are related risks involved in artisanal mining, some OEMs and battery manufacturers are trying to reduce exposure to cobalt, Liang added.

“For instance, [battery manufacturers] continue to launch technology programs to develop high-nickel batteries and reduce unique consumption of cobalt,” Liang said.