By Allison Proffitt
January 29, 2021 | “The Li-ion battery industry has proven to be a tough industry in the last decade. Abundant competition, steep learning curves, aggressive capital investments, and demand uncertainty have led to a low-margin industry,” said Alison Saxby, Managing Director at Roskill Information Services. Yet Roskill predicts changing tides, positioning the EV and battery industry in a much better demand position in the coming years.
During the Advanced Automotive Battery Conference Europe last week, Saxby outlined the global critical raw material market and how it intersects with the EV battery supply chain. Scarcity is a socio-economic construct, Saxby pointed out, one shaped by context over time. For instance, in the 18th century, British economists were most concerned about food scarcity, but that focus shifted to coal to drive industrial production in the 19th century. Today, new technologies, geopolitical forces, trade wars, and sustainability drive perceptions of scarcity and the definitions of critical materials, but generally critical materials are metals and minerals of high economic importance and at risk of supply shortage.
The European Commission published its fourth list of critical materials in 2020—30 materials were included on the new list based on economic importance, a materials’ criticality in the value chain, and supply chain risk: ease of extraction and processing. Lithium, bauxite, titanium and strontium were new on the list in 2020, Saxby said. Cobalt, rare earth elements, and natural graphite remained on the list from past years. “And out was helium,” Saxby laughed, “having turned a decline in economic importance as measured by the study.”
Roskill’s assessment of the battery materials value chain as a whole is strong. In 2020, this was a $50.3B industry, Saxby said. Raw materials consist of $14B of that total and process materials contribute another $20B, she said. “By 2030, Roskill expects to see this exceed over $300B.”
Nickel, cobalt and lithium still make up 75% of cathode and cell costs, Saxby pointed out, but Roskill does expect the overall cost to produce Li-ion cathode materials to decrease as raw material costs fall. Technological advances will also shift the market for materials. The auto industry is pushing for cathodes with more than 80% nickel, Saxby observed, and lithium iron phosphate batteries are regaining market share thanks to competitiveness in safety.
Sustainability is another market driver, impacting governance and environmental commitments. Elon Musk even promised a long-term contract for anyone who could mine nickel efficiently and in an environmentally sensitive way, Saxby said.
The sources for these raw materials are not varied, however. 78% of the EU’s nickel is sourced from Chile, Saxby reported, 68% of its cobalt from the Democratic Republic of Congo. 48% of graphite is sourced from China and 98% of the rare earth elements.
Refining capacity, however, is a major bottleneck, keeping lithium-ion battery supply risk moderate to high, according to Roskill’s assessment. Raw material refining is dominated by a few countries: chemical refining of cobalt and nickel are both dominated by China; refining of lithium is dominated by China and South America.
European EV Battery Outlook
Roskill predicts the Li-ion battery industry will reach a value of $150B by 2030, and the automotive portion will account for 45% of the Li-ion battery pie. Huge growth is expected of the critical raw materials market to meet demands. Saxby flagged still impressive growth for the cobalt market, even as battery makers try to move away from cobalt as a component.
Roskill predicts that by 2030, Europe will be 45% self-sufficient in cathode material manufacturing. Domestic chemical companies are expanded their capabilities to manufacture cathode precursors but will still depend on imported materials from Asia. “Local governments and regulators will need to start providing generous incentives to build these upstream facilities,” she said.
Yet Roskill expects Europe and the US to hold more weight in the Li-ion battery landscape as we approach 2030. New plants are planned in Germany, Sweden, Poland, Hungary and the US—albeit mostly from Asian companies planning to serve auto OEMs in those geographies.
The European Commission is doing its best to support the industry through the Critical Raw Materials agenda. The EC is working to enhance mining and recycling activities in the EU and foster efficient use and recycling of critical raw materials. It is also focused on negotiating trade agreements, challenging trade distortion measures, and implementing sustainable development goals.
But Saxby cautioned that these goals still need to be advanced past the definitional phase.