LFP 2.0 is not about the price of lithium, here’s what’s driving demand

After a number of questions from our clients on the lithium iron phosphate (LFP) resurgence – or LFP 2.0 – in the electric vehicle (EV) space, Caspar Rawles, Head of Price Assessments at Benchmark Mineral Intelligence outlines why this is not about the price of lithium and how the reasons are more nuanced. 

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LFP not driven by the lower market price of lithium carbonate 

The resurgence of LFP is not about the price of lithium.

Although the cost of lithium carbonate vs hydroxide has had a bearing on the trend of cathode technology, this is not specific to LFP.

The price of lithium has been volatile over recent years, riding a new wave of lithium ion battery demand prices rose to record highs, instigating an influx of new supply, in general, which ultimately led to an abrupt correction.

The Benchmark global weighted average lithium carbonate price was $5,211/tonne in March 2015, a year later it had increased to $9,844/tonne, by March 2017 this was $11,938/tonne eventually peaking at $17,513/tonne in March 2018.

Following this lithium carbonate has seen a consistent slide in prices with the Benchmark global weighted average lithium carbonate price falling to $6,582/tonne as of May 2020. 

Although the Benchmark global weighted average lithium hydroxide price has seen premiums in excess of 40% over carbonate at points during this cycle, it is not the lithium alone that has been prohibitive to adoption of NCM cathode chemistries. 

At a time when EV producers are increasingly cost-conscious, the use of higher value cobalt and nickel inputs have had a much bigger bearing over cost considerations than the lithium component which varies in its chemical form across cathode chemistries, but remains relatively consistant in its volume intensity.

LFP contains close to the same amount of lithium as competing chemistry, nickel-cobalt-manganese (NCM), so if the price of lithium was the fundamental driver of the adoption, carbonate-containing NCM variations would have benefited in the same way.

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Iron & phosphate are key LFP differentiators

The lower cost of LFP is fundamentally tied to iron and phosphate replacing nickel and cobalt – a major differentiating factor for this cathode chemistry. 

Quite simply, NCM users need to manage three critical raw material inputs of nickel, cobalt and lithium versus LFP’s one (lithium).

The introduction of iron and phosphate makes LFP cathode half the price of commonly used NCM cathode of today and a very attractive option for new EVs within China (see below). 

Therefore, its important to understand that this is a key driver of adoption rather than the at present lower price for lithium, an input that will remain price volatile for the long term.

The cost difference between carbonate and hydroxide has, however, played a role in the evolution of NCM cathode technology, specifically NCM 811 as the higher nickel cathode technology requires lithium hydroxide in its production.

As the price of cobalt has fallen since the highs of April 2018 when the Benchmark cobalt battery metal price reached $43.63/lb ($96,200/tonne) to current levels $14.68/lb ($32,400/tonne) as of May 2020, as well as the premium of lithium hydroxide over carbonate persisting, this has seen pressure to move to NCM 811 reduce – with the move being driven primarily by the need for greater energy density rather than cost-saving.

LFP is getting better, takes advantage of established technology, reliable supply chains

LFP is a well-established technology that has improved since 2015, is known for its safety and reliability, and has been primarily used in electric buses.

LFP battery production capacity and expertise already sits within China, and especially the efforts of CATL and BYD to improve energy density levels over the last five years. 

This has allowed Tesla to leverage the timing of its Shanghai Gigafactory to partner with CATL for its standard range Model 3, the first time the US auto maker utilised LFP cathode and prismatic cells, a Benchmark exclusive you can view here

LFP cathode also has a good cycle life but surrenders energy density for these benefits. Recent improvements in cathode and cell pack design, known as cell-to-pack (CTP) have also increased pack level energy density.

This is ideal for markets where consumers prioritise cost savings over range. 

LFP is China centric, best fit EV for the market 

Benchmark is only seeing increased LFP uptake in the Chinese passenger EV market for lower priced and lower range models, in what is the fastest growing and most diverse electric vehicle market in the world.

This market has the need for lower cost EV options more so than in western markets. 

LFP does not feature on major automakers technology plans for passenger EVs outside of China currently, as the industry pushes for greater range.

Technology pathways are currently focussed on deploying NCM 811 into passenger EVs in the coming 12-18 months 

Outside of China LFP will continue to play a role, but more prominently in heavy duty vehicles and other applications where range or weight are not as critical.

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