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November 5, 2017 | 15:00 | Dubai
A recent study by the Boston Consulting Group has predicted a steady rise of electric vehicles to 2030. As per the study, a serious traction in most global markets will pick up after 2025 and will likely account for ~14 percent of total global vehicle production by 2030. This demand in turn is likely to act as a major trigger for raw materials within battery production for these car, Cobalt being one.
Cobalt prices have almost doubled from US $ 32,800 / MT (Dec 31, 2016) to US $ 62,000 / MT (Nov 01, 2017), primarily due to its extensive demand as a key raw material for battery production. With demand for electric vehicles slated to take off in a major way in the coming years, demand for cobalt is expected to increase substantially.
Lithium-Nickel-Cobalt-Aluminium (NCA) batteries have relatively high “energy density” (i.e. capacity for storing energy per kilogram of weight) as compared to other battery types. Another alternative is the Lithium-Nickel-Manganese-Cobalt (NMC). The cost of battery contributes to 35% to 45% of the total average cost of an electric vehicle – for example, current cost of battery production is approx. US $ 250 per Kwh and a Tesla Series 3 has typically a 50 Kwh or 75 Kwh battery depending on the range offered. This brings into focus the key price drivers of the raw materials for batteries that power electric vehicles.
Volatility in prices of raw materials such as Lithium, Cobalt, Nickel and Aluminium could adversely impact future growth of the electric vehicles market. Out of these four metals, demand for Cobalt resulted in the maximum price increase during the YTD 2017. Almost 50% of the global production of cobalt (66,000 MT out of 123,000 MT in year 2016; Source: USGS) is by the politically unstable Democratic Republic of Congo. Other major producers of cobalt are Australia (14%), Cuba (7%), Philippines (4%), Canada (4%), Zambia (4%) and Russia (4%) among other countries. In the year 2016, China’s share of global refined cobalt production was more than 50% (45,000 MT).
In anticipation of the boom in electric vehicle demand, prices of other raw material for batteries have also increased in the last couple of years. Lithium Carbonate prices in North America increased from approx. US $ 6,650 per MT in Dec 2015 to over US $ 14,500 per MT in Sep 2017. Chile (52%) is the largest producer of Lithium Carbonate followed by China (22%), Argentina (14%) and Australia (11%) – annual production estimated at approx. 14 million MT (Source: USGS).
Nickel spot prices on LME have also increased sharply from US $ 8700 in Jun 2017 to over US $ 12,700 per MT on Nov 01, 2017 – a 46% increase in just under five months. Cobalt is a by-product of Nickel and Copper mines. Demand for cobalt and nickel in electric vehicles could provide additional incentive for the copper and nickel mining industry that has been lagging for the last couple of years.
With solid state battery technology potentially leading the next wave of innovation, it remains to be seen which of the metals / raw material for batteries would continue to have sustained demand in the years ahead.