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Metal prices challenge battery sector

European materials firms take positions as electric car adoption accelerates

by Alex Scott
September 18, 2017 | A version of this story appeared in Volume 95, Issue 37

A photo of BMW’s i8 hybrid car.
Credit: BMW
German carmaker BMW will bring out an all-electric version of its i8 hybrid model, pictured, as part of its quest to generate 15 to 25% of sales from electric cars by 2025.

Elon Musk, head of the electric car company Tesla, disclosed in August that more than 450,000 people have placed deposits on the firm’s latest electric car, the $35,000 Model 3. The U.S. firm will start producing it at scale next year. Such strong consumer interest in an electric car is unprecedented and marks a tipping point for electric cars entering the mainstream.

And Tesla isn’t going it alone. In recent months a slew of carmakers—including VW, BMW, Mercedes, and most other major European players—have announced dates when they will phase out production of diesel- or gasoline-only vehicles as they switch to hybrids or all-electrics.

All these cars will get their energy from batteries, mostly ones that use lithium-ion technology. The flood of activity is leading some market watchers to question whether the battery supply chain—from metal mining firms to materials companies to battery makers—will be able to keep up with anticipated demand.

To ensure they can step up production, some battery materials firms are securing long-term supply contracts for key battery metals. Meanwhile, developers of alternatives to lithium-ion batteries—such as sodium-ion or solid electrolyte batteries—are hopeful that their approaches will now get a second look.

The typical lithium-ion battery consists of an anode made of graphite and a cathode made of a metal oxide such as nickel-manganese-cobalt oxide. Electrolytes based on lithium salts enable lithium ions to move back and forth between the electrodes to release electricity.

As demand for electric cars from Tesla and other firms has risen in the past year, prices for lithium, cobalt, nickel, and other key battery materials have followed suit. So far, the higher materials prices have increased battery costs by less than 10%, but more price hikes are likely as battery demand continues to grow, analysts say.

And the rate of electric car adoption is forecast to accelerate. The International Energy Agency predicts that up to 157 million will be on the road by 2030, up from just 2 million in 2016.

A big slice of the demand is coming from Europe. Norway has become the world leader in electric cars, with about 35% of its new cars sold with a plug. In other countries, legislation is set to squeeze out diesel and gasoline cars. France and the U.K., among others, will ban the sale of gasoline and diesel cars by 2040. Some European cities, including Paris, plan to be diesel-free as soon as 2025.

Regulators are targeting diesel cars because they emit high levels of nitrous oxides and tiny soot particles that penetrate lungs. Air pollution in European cities is estimated to cause 50,000 early deaths annually.

European car companies are responding. Jörg Huslage, the head of electrochemistry research for VW, told C&EN at a German science symposium during the summer that his company is “going all out” for electric cars.

And according to Peter Harrop, chair of the British technology market research firm IDTechEx, 15 major battery factories around the world are under construction, including Tesla’s so-called Gigafactory in Nevada.

Electric rise

A graphic of cars showing the projected number of millions of cars that will be electric by 2030.

Government policies to limit increases in global warming are expected to spur electric car adoption. 

Source:International Energy Agency

The pinch points in the production of lithium-ion battery materials are lithium and cobalt. Electric car batteries can weigh half a metric ton. Tens of kilograms of lithium—in the form of lithium carbonate or lithium hydroxide—are needed for the cathode. Other lithium-based chemicals go into the electrolyte. Smaller amounts of metals such as cobalt, manganese, and nickel also feature in cathodes.

Demand for lithium will increase fourfold by 2025, according to Robert Baylis, managing director of Roskill, a London-based metals market research and consulting firm.

Global demand for lithium carbonate is about 300,000 metric tons per year. Only a handful of companies—including the chemical firms Albemarle and FMC—extract lithium on a large scale, and all are planning capacity expansions. Production is concentrated in South America, China, and Australia.

For example, Talison, a mining firm 50% owned by Albemarle, is doubling production at its Greenbushes mine in Australia to more than 160,000 metric tons per year of lithium carbonate equivalents. The expansion is scheduled for the second quarter of 2019. Albemarle also recently increased lithium carbonate production in Chile.

There is no question that the ground holds enough lithium to power millions of cars. But with potential delays in the ramp-up of new production, supply may lag demand at times, analysts warn.

Prices for both cobalt and lithium have doubled in the past 18 months, Baylis says. Contract prices for lithium hydroxide, the more expensive of the two basic lithium chemicals, are as high as $20,000 per metric ton.

Global demand for cobalt is about 100,000 metric tons per year. In the past year, the London Metal Exchange spot price for the pure metal form of cobalt has risen from $26,200 to about $61,000 per metric ton.

Cobalt availability could soon become an issue. A major challenge for cobalt suppliers is that the metal is typically made only as a by-product of mining copper or nickel. More than 50% of cobalt is dug up in Congo.

Glencore, the world’s largest cobalt producer, plans to increase production at its Katanga mine in Congo by up to 22,000 metric tons per year in 2018. But the expansion is not a certainty because Congo is in an economic crisis, complete with general strikes and inflation running at 50% per year.

The financial outlook for cobalt has encouraged speculators such as Cobalt 27 Capital, which launched in July on the Frankfurt Stock Exchange, to buy up physical stocks of cobalt as well as options on future cobalt production. Cobalt 27 currently holds more than 2,000 metric tons of cobalt in warehouses in the U.S. and Europe. “When it comes to being hard to come by, cobalt is the king of the battery metals,” Anthony Milewski, CEO of Cobalt 27, wrote in an Aug. 16 blog post.

To ensure supplies for its battery raw materials business, the chemical company BASF recently signed a contract to purchase undisclosed quantities of nickel from Nornickel’s mine in Harjavalta, Finland. Nornickel will also supply BASF with nickel and cobalt from its mines in Russia.

The agreement enables BASF to go ahead with the construction of a series of battery material plants for electric vehicle battery cell developers in Europe, according to Kenneth Lane, president of BASF’s catalyst division.

The German firm says it is investing $475 million toward establishing a leading position in the production of cathode materials in Europe. “The local production of precursor materials is an important step in fostering the development of this industry in Europe,” the firm says. Among BASF’s key offerings are nickel-manganese-cobalt oxide (NMC) compounds for electric car battery cathodes.

Johnson Matthey, a British producer of battery materials including lithium-iron-phosphate (LFP) compounds for cathodes, also has long-term raw material supply agreements in place. The firm has secured a contract with Nemaska Lithium for lithium and established supplier relationships for other metals, says Jane Butcher, managing director of Johnson Matthey’s alternative power train business. The firm assembles battery cells and is developing nickel-rich, high-energy battery systems.

Some car companies are also signing agreements directly with mining companies. According to recent press reports, VW has secured a cobalt supply deal with Glencore as part of its strategy to sell 1 million electric cars annually by 2025, up from tens of thousands today.

The Belgian battery materials and catalysts firm Umicore is not only sourcing its battery materials from mining firms but also generating its own supply by recycling lithium-ion car batteries. In 2011 the firm opened a $30 million pilot recycling facility in Antwerp, Belgium, that can recover up to 7,000 metric tons per year of metals, including lithium and cobalt.

Meanwhile, developers of alternative battery materials hope rising prices for lithium and cobalt will encourage battery producers to adopt their technologies. One such company is the British start-up Faradion, which is developing a sodium-ion technology.

“Our costs in dollars per kilowatt-hours versus lithium-ion should always be lower based on the fact that we do not use cobalt in our active formulations for cathodes or require copper current collectors,” says Jerry Barker, Faradion’s chief technology officer.

“The cobalt issue is probably the single biggest factor affecting lithium-ion costs at the moment. China is moving towards more NMC product and less LFP for electric vehicles, which in turn increases the cobalt demand,” Barker says. Faradion’s challenge is that its sodium-ion material currently has lower specific energy than lithium-ion does.

Other technologies that avoid the need for cobalt include solid electrolyte systems. John B. Goodenough, an influential battery technology veteran at the University of Texas, Austin, is working in this field. Goodenough is combining a solid electrolyte with a sodium metal anode—rather than the standard carbon material—to form a highly energy-dense battery.

Car companies are also taking an interest in solid electrolyte systems, says Christopher Robinson, an analyst at Lux Research. BMW plans to introduce a solid-state battery as early as 2026, while Toyota is rumored to be targeting the introduction of such a battery in 2022.

Roskill’s Baylis casts doubt on the notion that the transition to electric cars will be immediate. He sees media froth around electric cars and suggests that the prices of lithium and other battery materials could even ease as car and battery producers start to better plan their future raw material needs and to strike long-term agreements.

IDTechEx’s Harrop, though, warns against complacency in the battery supply chain. He argues that a mass shift to electric cars is happening now. “By 2050 many automakers will have vanished,” he says, “because they got it wrong.”


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