TOKYO — Makers of electric vehicles and EV batteries have staked claim to both supplies and alternatives to lithium, cobalt and nickel as fast-rising prices of these crucial metals threaten to soar higher in the coming years.
The International Energy Agency estimates global demand for lithium will be 42 times greater in 2040 than in 2020, assuming a target of keeping Earth’s temperature increase below 2 C. Cobalt demand is projected to increase by a factor of 21, while nickel use grows by a factor of 19.
Prices are already climbing on the back of strong EV sales.
Lithium carbonate in China, the benchmark for the global lithium market, is hovering around 88,000 yuan ($13,500) per ton, up 120% from a year earlier. Bellwether spot prices of cobalt in Europe have risen 70% to around $25 per pound. Three-month nickel futures on the London Metal Exchange have reached the high $18,000 range per ton, up 30% on the year.
Companies in the EV supply chain have been spurred to action. In April, Chinese battery maker Contemporary Amperex Technology (CATL) invested in a compatriot company that owns copper-cobalt mining rights in Congo. Tesla has secured rights to 10,000 acres in the U.S. state of Nevada where it aims to produce lithium from clay deposits.
Investment to develop sources of these metals is booming. Lithium was the top driver for capital raising by 48 leading Australian-listed mineral explorers in the first three months of this year. They raised about 500 million Australian dollars ($368 million) for lithium development, more for any other metal and over triple the total for all of 2020, a report by accounting firm BDO says.
An electric vehicle in Frankfurt, Germany: EVs are expected to play a crucial role in reducing national carbon footprints. (Photo by Kosei Fukao) But increased investment will not lead immediately to greater supplies. Projects to develop a new mine need more than 10 years on average to start production, industry watchers say.
That time frame suggests supply will fall short of the expected growth in demand. Prices of cobalt and lithium already tend to be volatile because their markets are smaller than for other commodities. Cobalt prices more than tripled in two years to 2018 on expectations of a big EV boom but lost most of the gains in the following year.
Some battery producers are pinning their hopes on new technologies that do not need these metals. At the end of July, CATL unveiled a sodium-ion battery that contains no lithium, cobalt or nickel. Since sodium is widely and readily available on land and in the oceans, the announcement has raised hopes for breaking free of battery-related supply constraints.
For now, industry watchers say sodium-ion batteries have a lower energy density than a typical lithium-ion rival, which may leave the new technology unfit for powering EVs. But improvement in their performance could curb growth in demand for lithium. There are already commercially viable lithium iron phosphate (LFP) batteries, which do not need cobalt or nickel. Volkswagen plans to use such batteries for low-priced entry models.
The European Union’s push for more recycling of resources also could ease the supply-demand crunch. The creation of an effective recycling system in the EU’s battery industry will boost reuse of these metals and reduce dependence on natural resources, said Sanshiro Fukao, a senior researcher at Itochu Research Institute.
Major commodities exchanges see their own opportunity to profit from growing demand for battery metals. CME Group, the world’s leading derivatives marketplace, in early May launched lithium hydroxide futures on the Chicago Mercantile Exchange, designed to help market participants manage their battery metals risk. The exchange rolled out cobalt futures in December.
In a similar move, the London Metal Exchange started offering lithium hydroxide futures in mid-July. China’s Wuxi Stainless Steel Exchange also started yuan-based trading in lithium carbonate in early July.
Lithium and cobalt prices are mostly determined through negotiations between users and suppliers, with only a few transparent price indexes and financial products available to hedge against price fluctuations. The LME’s cobalt futures, listed in 2010, have failed to become a reliable price indicator because of low liquidity. An increase in market participants could make it an effective tool for reducing volatility risk.