Nickel v cobalt: The secret EV battle for the lithium ion battery

There is a low profile battle occurring between raw material miners and chemical manufacturers for the future of the lithium ion battery.
There is battery tug of war between nickel and cobalt that is being driven by electric vehicle (EV) manufacturers’ desire to cut battery cell costs and increase energy density.
But the push to high nickel 811 cathode chemistry is dogged by bad analysis and guess work that spells the end for cobalt and a new era of nickel.
The truth is a little more complicated as Benchmark Mineral Intelligence explains.

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One of the biggest talking points in the electric vehicle (EV) and lithium ion battery space right now is the emergence of an 811 NCM (Nickel Cobalt Manganese) cathode chemistry that many believe will result in the hammer blow for cobalt and the anointing of nickel.

For those newer to the battery industry, 811 quite simply stands for 8 parts nickel, 1 part cobalt, 1 part manganese. It is the natural evolution from the traditional 111 chemistry (equal parts of each), 523 (5 parts nickel, 2 parts cobalt and 3 parts manganese) and 622.

A word of warning: common error is to use the non-Chinese initials of NMC which would incorrectly point to 30% cobalt content in 523.

While there is much excitement over the high nickel chemistry, which brings with it higher energy density and a much bigger demand profile for nickel suppliers; the reality is that NCM 811 has not yet fully arrived and is some years away from having a major impact.

Some analysts point to the Chinese “black box” when explaining where 811 is being widely rolled out. However, China is not a black box if you are willing to travel to cathode and lithium ion battery plants within the country and put the miles in.

The reality is such that Chinese cathode manufacturers are developing 811 chemistry and small scale commercial lines but it is not yet being rolled out in any major way. The chemistry is however in production, that much is true, and that it is being driven by the consumers.

The impact of 811 on the lithium ion battery cathode market, however, is going to be minimal in the short term and Benchmark Mineral Intelligence forecasts this will not exceed 5% of total NCM cathode production until after 2020.

In fact, it is Benchmark‘s expectations that 811 cathode material will reach 25% of NCM’s market share by 2026 – enough to cause disruption in the raw material supply chain, but far from takeover.

Much like their Chinese counterparts, Korean and Japanese manufacturers are also developing 811 formulations at the moment  and their arm has been forced by two main reasons.

Stockpiled cobalt at Cobalt 27 warehouses

The first is cobalt prices.

In a 111 cathode, which is widely quoted to show the huge impact of cobalt prices on lithium ion batteries, cobalt understandably moves the cell manufacturing cost needle.

In a 111 cell, Benchmark’s new Lithium ion Battery Cost service reports that cathode material equates to 40% of the cell cost – significantly higher that any other NCM or NCA material due to cobalt being a third of that input by volume.

This has resulted in a surge in 523 production and to a lesser extent 622 output globally – especially in China which reduces cobalt’s input into a cathode to 20% while significant increasing nickel’s role to 50% and 60% (from 30%), respectively.

The second is auto pressure.

Understandably, EV manufacturers want to do all they can to reduce their price risk exposure to cobalt which is continuing to rise. Therefore, the push towards 523 and 622 is more than welcomed, especially as it brings with it increased energy density thanks to the nickel.

Therefore, it is unsurprising that in the same conversations, cathode manufacturers are pressured by the auto companies to speed up the evolution to 811 and even 7 1.5 1.5 chemistry.

To reduce cobalt to such a minor role – the major element involved in stabilising the battery – brings with it huge risk, especially in the first wave of pure EV models to hit the road when safety scrutiny is at its highest.

Lower cobalt cathodes, not lower cost

The third factor to consider is that despite the expensive cobalt being dramatically reduced in these higher nickel cathodes, it does not necessarily mean it will be available to the market at a significantly lower cost.

Current technology dictates that 811 cathodes need to be produced in an inert environment as to prevent any reaction with the atmosphere. Therefore, any new cathode plant producing this material will need to build a new, dedicated, inert atmosphere, production line specific to 811.

Cobalt conundrum remains regardless 

Even if despite all these challenges, the NCM 811 adoption is quicker than Benchmark Mineral Intelligence expects, the cobalt industry will still face a supply problem.

The chart below outlines a scenario in 2026 where 811 is adopted under three scenarios to serve a lithium ion battery industry that has grown to just under 1TWh.

The first assumes that 811 is 10% of that NCM future cathode market total. Under this scenario, battery grade cobalt output – which stands at nearly 50,000 tpa in 2017, the last full year of production – will have to increase to 205,000 tpa to meet the cobalt demands of the entire battery industry.

If 811 equates to 25% of the cathode market, 193,000 tonnes of battery grade cobalt will be needed.

Under our most bullish scenario where 811 is equal to a huge 40% of the NCM cathode market in 2026, the lithium ion battery industry will still require 180,000 tpa of battery grade cobalt.

That is over a tripling of battery grade cobalt production last year and just under a doubling of the industry’s total annual production.

There is little doubt that nickel’s future in lithium ion batteries is bright, however the cobalt conundrum is far from over. And considering it will be near impossible to commercially engineer cobalt out of a lithium ion battery within the next decade, it is fair to say that the cobalt conundrum is just beginning and the industry’s challenges will shift from supply to demand.

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This quarterly subscription includes detailed cost modelling of lithium ion battery cathode chemistry including:

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