Electric cars will drive a ‘rapid ramp-up’ in cobalt and lithium demand for a decade - report

Waymo’s driverless car. (Source: Alphabet/Google/Waymo)

Lithium-ion batteries are likely to remain the technology of choice for electric cars in the next decade, according to a landmark report released overnight by the world’s peak energy research body.

The International Energy Agency expects a “rapid ramp-up in the demand of cobalt and lithium” amid a revised expectation that electric vehicles on the road will number 125 million by 2030.

If “policy ambitions continue to rise to meet climate goals”, the number of battery-powered electric vehicles could be as high as 220 million in 2030 — including 130 million electric and 90 million plug-in hybrids.

Growing demand from battery makers — as well as speculative stockpiling and strategic sourcing — has already led to big jumps in the price of cobalt and lithium.

In the two years to January, cobalt spot prices have lifted 250 per cent while lithium prices are up 400 per cent.

“The eight-to-ten-year lifetime of EV batteries, combined with the rapid demand growth for battery capacity … mean that virtually all the material demand for battery capacity increases will have to be supplied by resource extraction at least up to 2030.

Cobalt demand will remain high

Despite recent bearish comments on cobalt from Telsa boss Elon Musk, the supply of cobalt was “especially critical” due to the concentration of mining and refining in a handful of countries, the report found.

The energy agency acknowledged ongoing development in reducing the cobalt content of batteries — aimed at higher energy and power density at the expense of lower thermal stability.

But even accounting for these efforts, cobalt demand in electric vehicles was expected to be ten to 25 times higher than current levels by 2030.

“Enabling a smooth transition to electric mobility requires ensuring a stable supply of cobalt at moderate prices.”

The agency went further, urging regulators to “reduce uncertainties on Electric Vehicle uptake” to encourage “investment in extraction capacity and the emergence of contractual arrangements spanning longer periods of time”.

Lithium-ion batteries will dominate for 10 years

There is still broad scope to improve lithium-ion battery technology and make it cheaper, the agency said.

“Key cost and performance drivers identified for the further improvement of lithium-ion batteries include battery chemistry, energy storage capacity, manufacturing scale and charging speeds.

“Several post lithium-ion technologies are also showing potential for improved performance and further cost reductions, but their current technology readiness level is still low.”

After 2030, lithium-ion technology might be overtaken by other battery designs — such as Li-air and Li-sulphur — which offer higher energy density at lower costs.

“However, their technology readiness level is very low, practical performance has yet to be tested and the performance advantage over lithium-ion is still unproven,” the report said.

Which other commodities will benefit?

Besides lithium and cobalt, the energy agency highlighted three other key materials — not usually identified as “battery metals” — that face increased demand from electric car makers: copper, rare earth materials needed in electric motors and the use of precious metals in batteries.

Nickel would be less impacted by car batteries which would remain a small use compared to demand in high-grade steel production.

“To date, nickel prices are not really affected by changes in EV-related demand, but rather by market dynamics that relate to an oversupply that lasted up to 2015, and market tightness after that, leading to a decline in the stocks accumulated until then,” the report said.

Read the full report here.

This article first appeared at Stockhead, Australia’s leading news source for emerging ASX-listed companies. Read the original here. Follow Stockhead on Facebook or Twitter.

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