|Tesla Model S cars
charging their battery with the
Tesla supercharger station near Shenzhen sport
arena, 15 November 2016.
Sparked off by the Tesla effect and Elon Musk’s
ambition to replace the world’s internal
combustion engines (ICEs) with electric vehicles (EVs), the EV
industry has experienced unexpected yet rapid growth over the
past three years.
Confounding the expectations of many, China, Japan and South
Korea have become the world’s production hub and
the centre of the EV revolution, with the likes of Panasonic,
LG Chem, SK Innovation, CATL, BYD, Umicore and Nichia
Corporation sustaining the rapid growth in the
world’s battery and new energy vehicle (NEV)
Sales and production of NEVs in China in 2017 of 794,000
units and 777,000 units respectively were up 53.8% and 53.3% on
the previous year, according to the China Association of
Automobile Industry Information Department (CAAM).
As well, sales and production of pure EVs in China rose
81.7% and 82.1% respectively last year to 478,000 units and
China dominates the NEV market and is set to dominate the
world battery market both in production and capacity, according
to James Frith, energy storage analyst at Bloomberg New Energy
"China is where the EV market is really expanding and
developing due to domestic consumption and favorable government
policies, which are supporting the fast growth of this market,"
James told Industrial Minerals.
World battery capacity will more than double to 320 GWh per
year by 2021 from 116 GWh at present, according to Blomberg New
Energy Finance. It predicts China to account for 216 GWh of
that capacity by 2021, which would be 70% of global capacity
(see graph 1).
China is the world's leading automaker, having led the
rankings in each of the last nine years. CAAM expects total
production of NEVs in China to surpass 1 million units in
|Graph 1: Mass contribution to lithium-ion
|Source: Bloomberg New Energy
13th Five-Year Plan
The Chinese battery industry’s strong
performance has largely been supported by generous subsidies
set by the 13th Five-Year Plan, established in 2015 by the
Party Central Committee and the State Council, to develop,
innovate and restructure the Chinese automobile
The main aim of this plan is to increase NEV production in
the coming years to reduce pollution in the country. This
process starts with the establishment of a solid and
sustainable domestic battery industry that aims to produce 2
million NEVs by 2020.
According to Bloomberg, Chinese authorities may have spent
close to 83 billion yuan ($13.24 billion) in 2016 and 2017 in
subsidies for NEVs, quoting the secretary-general of the China
Passenger Car Association, Cui Dongshu, up from 59 billion yuan
in 2015, Yang Yusheng, a member of the Chinese Academy of
Engineering, told the Securities Daily.
But central and local governments have since 2016 been
gradually phasing out these subsidies, as predicted by the 13th
Five-Year Plan, with the aim of consolidating the Chinese
battery industry by changing the status of state help from
necessary to auxiliary, without hampering the NEV
In line with the Chinese authorities’ goal of
creating and consolidating a sustainable NEV sector, the new
2018 subsidy policy aims to encourage the production of
high-performance batteries and vehicles with long ranges while
providing fewer or no subsidies to NEVs with lower ranges and
Industry observers expect an end to subsidies to NEVs with a
range lower than 150 km while the threshold of battery energy
density eligible for subsidies will rise to 140wh per kg from
90wh per kg in 2018.
The new subsidy policy is also likely to foster the
development of li-ion batteries with higher nickel content by
potentially supporting the development and production of the
likes of NMC 532, 622 and NMC 811 li-ion batteries.
Total subsidies (both local and central governmental) to
battery electric vehicles (BEVs) with a duration distance of
150-250 km in China fell 48.6% to 54,000 yuan in 2017 from
90,000 yuan in 2016, while for hybrid electric vehicles (HEVs)
above 50 km total subsidies fell 21.59% to 36,000 yuan from
60,000 yuan year on year.
Although the Chinese authorities have not yet released the
2018 NEVs subsidy policy, various Chinese battery manufacturers
expect further reductions in subsidies this year.
|Graph 2: Mass contribution to lithium-ion
|Source: Bloomberg New Energy
Conceived as far back as the 1970s, li-ion batteries have
grown in importance throughout the 21st century despite the
higher upfront cost compared with other types of rechargeable
batteries such as lead acid batteries.
Higher efficiency in charge and discharge, cycle life and
voltage as well as a lower environmental impact have
increasingly made li-ion batteries the battery of choice for
The li-ion battery family comprises six main commercialized
types of battery cathodes: nickel cobalt aluminium (NCA),
nickel manganese cobalt (NMC), lithium manganese oxide (LMO),
lithium iron phosphate (LFP), lithium titanate (LTO) and
lithium cobalt oxide (LCO).
These six types are characterized by the charge and
discharge process during which ions move from the negative
electrode (anode), composed of graphite, to the positive
electrode (cathode), which is typically made of lithium,
cobalt, nickel, manganese or aluminium, depending on the
Breaking down which type of battery is used by what company:
LFP batteries are used by Chinese car manufacturer BYD in its
plug-in hybrid (PHEV) vehicles BYD Tang, BYD Qin PHEV and full
electric vehicle BYD e6; NCA batteries are used by Tesla in
Tesla full electric vehicle Models S and X; LMO and NMC
batteries are used by Nissan in its full EV Nissan Leaf and by
Renault in its full EV Renault Zoe; NMC batteries are used by
BMW in its fully electric BMW i3 BEV and by Chevrolet in its
PHEV Chevrolet Volt, according to IVL Swedish Environmental
Research Institute 2017 paper The Life Cycle Energy
Consumption and Greenhouse Gas Emissions from Lithium-Ion
Despite the wide variety of li-ion batteries used by car
manufacturers, NMC batteries, which are a combination of LCO,
LMO and nickel, according to the MOBI Research Group Cost
Projection of State of the Art Lithium-Ion Batteries for
Electric Vehicles Up to 2030 research paper, are
becoming popular among NEVs due to their lifespan, high energy
density and good performance compared with LFP batteries, which
are characterized by a lower energy density, or NCA batteries,
which have a lower lifespan.
Among the different types of NMC batteries, the likes
of South Korean battery producers Sk Innovation and LG Chem are
favoring the recently introduced NMC 622 battery, used by
Renault in its Renault Zoe model, against the already
commercially well-established NMC 111 and NMC 532. The latter
is one of the most commercialized NMC battery cathodes in
NMC 811 batteries also appear on many different automotive
roadmaps due to their superb energy content, according to
CellPress research paper Lithium-Ion Battery Supply Chain
Considerations: Analysis of Potential Bottlenecks in Critical
Yet concerns related to the safety and lifespan of NMC 622
and 811 batteries have deterred some NEV manufacturers from
adopting this type of cathode chemistry for now.
Efforts to extend the range of electric cars and improve
battery performance are leading major NEV and battery
manufacturers to develop the NMC li-ion battery technology
For example, Tesla and Jeff Dahn, a professor in the
Department of Physics & Atmospheric Science and the
Department of Chemistry at Dalhousie University, recently set
up a research partnership to develop NMC battery cells. Their
aim is to double the lifetime of the battery cells in Tesla
products while increasing energy density and reducing
Also, BYD has confirmed that in 2018 it will introduce NMC
532 li-ion batteries in the company’s E5 450,
QingEV 450, SongEV 450, and YuanEV 360 NEV models,
demonstrating the company’s move away from LFP
li-ion batteries - one of the most common types that Chinese
NEV manufacturers use.
Meanwhile, Ningbo Jinehe New Material Co, Beijing Easpring
Material Technology Co and Ningbo Shanshan produce NMC 622
SK Innovation and LG Chem also aim to introduce NMC 811
batteries to the market between 2018 and 2019, which experts
consider to be the most advanced version of NMC
SK Innovation supplies batteries to NEV manufacturers such
as Mitsubishi, Mercedes Benz and Hyundai Motors, LG Chem
supplies batteries to the likes of General Motors, Renault,
Volvo and Hyundai while Panasonic supplies Tesla.
|Choosing the most environmentally
friendly options from
electric, hybrid and diesel vehicles.
|Graph 3: cobalt low-grade free market $ per
lb in warehouse
Adoption of NMC batteries and technology
The production and use of NMC 532, 622 and 811 li-ion
batteries by Tesla, SK Innovation, LG Chem, BYD and others
could speed up the world’s adoption of this type
of battery cathodes. The introduction of NMC 811 batteries will
help extend the range of electric cars up to 500 km and will
also help develop new batteries that can provide a range of
more than 700 km by 2020, Lee Jon-ha at SK battery research
centre said, according to the Korea Times.
Extending a NEV’s driving range per single
charge is one of the main aims of battery and NEV manufacturers
because range anxiety remains a major issue for consumers and a
constraint in the mass adoption of EVs.
The development and use of NMC 532, 622 and 811 batteries by
different producers are propelling the li-ion battery industry
to reduce cobalt content while increasing the nickel content in
the new NMC battery technology.
This technological change in an NMC battery
cathode’s chemistry could drive production costs
lower given elevated cobalt prices at present while improving
overall battery performance and increasing the EV battery life
span, driving range and safety.
The chemistry change in mineral content from NMC 111,
composed of one part nickel, manganese and cobalt, to NMC 811,
composed of eight parts of nickel, one part of manganese and
one part cobalt, is noticeable.
Comparing the high cobalt content in li-ion battery cathodes
such as LCO with NMC 532, 622 and 811, the cobalt content in
NMC 532 and 622 batteries has fallen by around 80% to 12%. For
NMC 811 batteries, cobalt content has fallen by 90% from 60% to
6% cobalt content (see graph 2).
The roadmap for li-ion batteries in the next 10 years is an
open discussion, however. The speed at which the major battery
manufacturers introduce the high nickel NMC li-ion batteries
(or other li-ion batteries) alongside new generation batteries
such as solid state batteries will determine which technology
or technologies will prevail over then next year (see table
|Graph 4: Lithium carbonate battery grade
Chinese spot market
prices vs large biannual EU and US lithium
Graph 5: Nickel three-month LME Daily
Official $ per tonne
Of the li-ion battery raw materials swept up in the EV and
battery industry boom, the prices of cobalt and lithium have
risen furthest. One problem, often acknowledged by cathode and
battery makers, is that higher cobalt prices are pushing
battery manufacturers toward reducing the amount of cobalt in
One other problem affecting cobalt is the supply chain in
the Democratic Republic of Congo (DRC) due to political
instability as well as the use of child labor in artisanal
mining, which has increased the international
Although most of global cobalt production comes from the
DRC, cobalt typically arises as a byproduct of copper or nickel
mining operations. So these metals drive cobalt supply rather
than the cobalt price itself.
This is a major constraint to the increase of global cobalt
Cobalt is mainly mined across the copper belt in Africa,
crossing areas of the DRC and Zambia, although it is also mined
in Morocco and Madagascar, among other places.
The rapid increase in demand for cobalt since 2015 alongside
production constraints have triggered a rapid increase in its
price, exacerbated by fears of a supply bottleneck and the fact
that the DRC makes a large contribution to world cobalt
The involvement of investors - who have actively locked away
material for speculative purposes - has also contributed to the
rise in cobalt years over the past two years.
The cobalt low grade free market in-warehouse monthly
average price increased 280% to $37.7 per lb on January 3, 2018
from $9.90 per lb on December 9, 2015, according to Metal
Bulletin (see graph 3).
While the ratio of nickel to cobalt in battery cathodes can
increase, the current most-used chemistries cannot completely
do without cobalt. The future of this metal depends on
improvements to its supply chain.
The presentation of zero emission
BYD K9 on the bus show in Kielce
19th September 2013.
|Graph 6: Chinese spherical graphite exports
(Jan-Sep, Kg, $)
|Source: Industrial Minerals and Chinese
The lithium supply chain also struggles to meet battery
sector demand; however, in contrast to cobalt, there are many
lithium resources across the world in both brine or hard rock
forms but the vast majority of these remain
Contrary to popular assumption, starting lithium brine pools
or mines is an incredibly lengthy process - from scratch, new
lithium mining projects can take 10 years or more before
production starts. Expanding lithium mining projects that are
already operating (either brine ponds or mines) can take a year
or two before the material reaches the market, if not more in
Global production of lithium carbonate equivalent (LCE) in
2016 was around 189,900 tonnes, below estimated demand of
200,000 tpy of LCE, according to Industrial Minerals
Research Global Lithium Market: Five Year Strategic
LCE demand will treble to around 600,000 tpy by 2026,
falling short of expected LCE supply of 379,800 tonnes that
year, according to the Industrial Minerals outlook report.
The rapid and unexpected increase in demand for lithium
compounds in 2016 sent prices soaring while lithium suppliers
struggled to, or could not, meet demand.
Lithium prices increased 296.5% between October 2015 and
June 2016. The lithium carbonate (Li2CO3) spot price, ex-works
domestic China more than tripled to an average of $27 per kg in
June 2016 from $7.70 per kg in October 2015.
In January 2018, the lithium carbonate (Li2CO3) battery
grade average spot price, ex-works domestic China remained
strong at $24.93 per kg.
European and US lithium contract market prices increased,
catching up with the price movement in the Chinese lithium
carbonate spot market, the price driver of the
world’s lithium contract and spot
In Europe and the United States, lithium carbonate contract
prices increased 169.2% to $17.50 per kg in January of 2018
from $6.50 per kg in June 2015 (see graph 4).
As well, robust battery demand has kept the price of lithium
hydroxide monohydrate (LiOH.H2O, min 56.5%) - reputedly one
of the preferred lithium compounds for use in car batteries -
around and above $20 per kg over the past year.
In China, the lithium hydroxide monohydrate (LiOH.H2O, min
56.5%) battery grade average spot price, ex-works domestic
China stands at 150,500 yuan ($23,570) per tonne as of February
1, while the average spot price for the same day in Europe and
US on a delivered duty paid (DDP) basis was $20.50 per kg,
according to Industrial Minerals.
China and Australia should to play a bigger role this year
in the lithium supply chain, while SQM and
Albemarle’s production expansion plans in the
following years could reinforce Chile’s role as
the world’s leading producer.
Tightness of supply for other key battery raw materials such
as cobalt, in addition to a shortage of processing capacity,
could pose a threat to lithium demand despite the booming
Furthermore, a bottleneck in the conversion of Li2O
spodumene into lithium carbonate in China, where most of the
world’s lithium hard rock production flows, is an
added fear for nvestors and for the lithium industry, George
Cheverley, a portfolio manager at Investec, told Industrial
In contrast to the cobalt supply chain, the traditional
lithium producers capable of producing battery-qualified grade
lithium carbonate (Li2CO3) or lithium hydroxide monohydrate
(LiOH.H2O) have production facilities in politically stable
countries such as Chile, Argentina, Australia, China and the
Yet even though different metal exchanges are interested in
setting up a lithium contract, similar to the cobalt
contracts established by the London Metal Exchange, futures
or speculative trading of lithium remains quite a remote
concept for the lithium industry.
Producers and consumers of nickel expect EVs to support the
physical nickel market in the coming years; however, an uptick
in demand from battery producers has not yet
A spark in demand is expected anywhere from two years in
2020 to a decade from now. Still, EV-related should continually
tick higher over the coming years.
"EVs will continue growing slowly in the next couple of
years. After 2020 it might go faster," one nickel trader in
Europe told Metal Bulletin.
Hype surrounding EV demand helped push the LME three-month
nickel price to around $12,850 per tonne during LME Week last
year, its highest in two years. It hit a fresh peak late in
January 2018, nearing $14,000 per tonne on a weak dollar (see
Nickel producers and consumers believe that EV and battery
demand could keep the nickel market humming in the coming
Graphite remains the primary component of the lithium
battery anode in mainstream battery chemistries (LMO, LFP, NCM,
NCA) in use today, and can also be found in minor volumes in
the cathode as a conductivity enhancement additive.
While China produces almost all spherical graphite (SG),
several non-Chinese market participants are looking to move
into this segment in the coming years. China is also the
single largest exporter of SG - it ships the material in its
uncoated form predominantly to destinations including South
Korea and Japan where the coating is applied. Chinese exports
of coated SG are, in comparison, much lower.
As of 2015, batteries had a 10% share of the total graphite
end-market by application. This will increase to 17% by 2021,
according to Industrial Minerals Graphite Handbook
Refractories and metallurgy (for carbon-raising
applications) remain the largest end markets for graphite, with
another share taken by lubricants, parts and other
Until recently, the status quo in SG was of
Chinese regional governments had been encouraging widespread
production of both uncoated and coated spherical material from
local companies to serve the battery sector. This encouraged
the domestic graphite industry, which is diffuse and dominated
by small firms, to seek in greater numbers to benefit from the
tax breaks and favorable conditions.
Demand from battery makers had not increased as rapidly,
leading to a situation of large material supply that end
markets could not absorb. In turn, this brought about a
progressive decrease in SG prices.
The Chinese spherical 99.95% C, 15 microns fob price moved
down to a monthly average of $2,475 per tonne in January 2018
from an average price of $2,750 per tonne in October 2015,
according to Industrial Minerals.
Last year, however, was different. A government-led
environmental drive aimed at reducing industrial pollution
targeted the graphite industry among many others, with
widespread inspections, limitations and shutdowns of graphite
On the demand side, meanwhile, the market finally started to
display some traction for graphite for battery use, at least in
traded volume terms.
Chinese exports of SG (including both uncoated and coated
material) rose 12% to 28,860 tonnes in January-September 2017
from just above 25,000 tonnes a year earlier. This is the
second year in a row of increasing volumes (see graph 6).
But in revenue terms the picture is not as rosy - the value
of exports fell 7% to $91.11 million in January-September from
$97.63 million a year earlier.
This seems to show that graphite is only just starting to
benefit from the recent growth in interest from the EV industry
while the prices of the other leading battery raw materials
Large-scale battery production facilities set to consume
large volumes of graphite output as the main anode component.
Taking Tesla’s Gigafactory in Nevada as an
example, which is expected to output 35 GWh per year by 2020,
Industrial Minerals Research estimates the plant would consume
an equivalent of 100,000 tpy of flake graphite (assuming the
flake to spherical yield rate is below 50%).
Overall, the battery market represents the single largest
potential driver of growth for graphite in the coming years.
Until now, however, this has been a gradual and long-term
adjustment rather than a rapid surge.