High Voltage: Lithium supply needs to increase 1700pc by 2040 to meet COP26 goals
Our High Voltage column wraps all the news driving ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, and vanadium.
A declaration at the Glasgow climate conference that seeks to phase out sales of petrol and diesel vehicles by 2040 would mean a +3000% increase in annual electric vehicle battery demand and a substantial increase in raw material requirements, according to Benchmark Mineral Intelligence analysis.
That’s going to be extremely difficult, the pricing agency says.
Benchmark estimates that if all cars and vans sold in 2040 were electric it would represent almost 8,400 GWh of lithium-ion battery demand.
In reality, this target will be difficult to meet, with Benchmark already forecasting 6,200 GWh of battery demand from the entire electric vehicle market in 2040.
This target would require over 7 million tonnes of lithium (LCE) annually, which is 17 times more than lithium chemical production in 2021.
It would also require over 5 million tonnes of nickel sulphate, which Benchmark’s Nickel Forecast shows is 19 times more than nickel sulphate production in 2021.
At the moment there is insufficient investment into raw material supply to meet battery demand in 2030 let alone 2040, Simon Moores, CEO of Benchmark Mineral Intelligence says. While building a battery cell production facility can take two years, it takes a minimum of five years to bring on a new lithium mine.
“Right now, lithium demand is growing at three times the speed of lithium supply,” Moores says.
“That’s a big problem that needs to be solved.”
In July, the sale of lithium iron (LFP) phosphate batteries for electric vehicles in China surpassed the incumbent NCM/NCA chemistries for the first time since the start of 2019.
Lithium Australia (ASX:LIT) – one company looking to take advantage of the fast-growing LFP market – says Chinese battery installations into LFP electric vehicles were up 309% year on year to 30 September 2021.
That momentum has carried through October, with production of 15.9GWh LFP batteries exceeding 9.2GWh for ternary (NCM/NCA) batteries, according to data from the China Automotive Manufacturers Association (CAAM).
WHAT IS LFP?
In batteries with LFP chemistry, phosphate serves as the cathode material.
NCM (lithium nickel cobalt manganese) batteries use a combination of nickel, manganese, and cobalt for the cathode, while NCMA (nickel, cobalt, manganese, aluminium) chemistry features a 90% nickel cathode.
Because iron and phosphate are more common than cobalt and nickel, LFP batteries are ~$US18 cheaper than NCM/NCA per kWh to manufacture, according to SNE Research.
The downside is that they have lower energy densities which makes them unsuitable for longer driving ranges. That is not really an issue for the stock standard work commute though, which explains their popularity.
“The LFP battery market has seen growing sales since the second half of last year, given the battery’s lower manufacturing costs, while NCM/NCA batteries typically have higher energy densities and a longer driving range,” Argus says.
“The advantages of LFP batteries have emerged following a fall in government subsidies for the NEV industry and rises in cobalt and nickel prices this year.”
Cobalt sulphate and nickel sulphate — key ingredients used in NCM/NCA lithium-ion battery production — were last assessed by Argus at Yn90,000-93,000/t and Yn33,500-36,500/t ex-works respectively, having risen by 62% and 18% since the start of this year.
A GLOBAL SHIFT TOWARD CHEAPER BATTERIES?
Outside China, Tesla recently flagged a move to LFP for its high volume, standard range Model 3 and Model Y electric cars, marking what could be a wider shift away from the more expensive nickel cobalt aluminium (NCA) chemistry.
It’s not the only company making that move. Ford has also flagged that it will use LFPs in some commercial vehicles while German giant Volkswagen also plans to use LFPs.
However, even if LFP does eat into the incumbent market, the EV world will still need a lot of nickel and cobalt.
Exactly. It’s not one or the other. The universe is expanding and the world@is becoming battery powered.
— Simon Moores (@sdmoores) November 8, 2021
Korean battery players are actually increasing the ratio of nickel in some batteries to make them more powerful.
LG Energy Solution has developed NCMA (nickel cobalt manganese aluminium) batteries that contain 90 per cent nickel, while Samsung SDI has come up with NCA (nickel cobalt aluminium) batteries that contain 91 per cent nickel.
Here’s how a basket of ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths and vanadium are performing>>>