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Lithium, cobalt prices key to neodymium demand

By William Clarke
Published: Friday, 29 June 2018

As long as battery materials are scarce, EV manufacturers will need rare earth magnets.

The booming electric vehicle sector has already resulted in massive increases in demand for lithium and cobalt for use in batteries.

And the trend is also driving demand for neodymium, a rare earth used to make magnets for use in electric vehicle (EV) motors. Consultancy Roskill, which estimated global neodymium demand at 31,700 tonnes in 2017, forecasts it to rise to 34,200 tonnes in 2018 and 38,800 tonnes in 2019.

But demand for rare earth magnets is not just dependent on total EV numbers. The fact that neodymium magnets can be removed from vehicle powertrains, at the expense of battery capacity, means that prices will be highly correlated to battery materials - lower cobalt and lithium prices could discourage neodymium demand while higher neodymium prices could unlock further demand for battery materials.

Permanent magnets in EVs can be replaced by electric magnets powered by a car's battery system. In fact, EV pioneer Tesla favored electric magnets in previous car models, driven in part by concerns over the security and sustainability of rare earth supplies.

But Tesla was eventually forced to adopt rare earth magnets for the Model 3 as the only affordable way to deliver high power-to-weight ratios.

The problem is that substitution of permanent magnets with electric magnets increases the load on the battery.

The capacity of a battery would need to be increased by a "conservative 5%" to compensate for removing rare earth magnets, Adamas Intelligence estimates.

This has a knock-on effect on the cost of battery materials. Prices for lithium and cobalt are soaring because of demand from the EV sector.

This means it is considerably cheaper for car manufacturers to use permanent magnets for now despite rising material costs.  

And there is currently no affordable variety of permanent magnet that does not contain rare earths. Magnets made from samarium, another rare earth, alloyed with cobalt offer similar performance to neodymium magnets but have higher material costs and increased exposure to cobalt markets that are themselves tied to battery demand.

So neodymium demand is closely tied to battery mineral demand. Rising sales of EVs will drive up demand for both of those materials.

And the increased battery load required for substituting electric magnets means that neodymium is essentially a way for vehicle manufacturers to thrift lithium and cobalt.

If the prices for neodymium rise too far, it could unlock new battery mineral demand - manufacturers would need to increase battery capacity to accommodate electric magnets. And falling battery material prices - or cheaper battery technology - could reduce the potential ceiling on neodymium prices.



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