In Le Monde 30/03/2021 (Full version)
Over the past five years, cobalt prices have risen almost fivefold, then fallen fourfold before rising again by 50%. The instability of these prices has encouraged a reduction in the consumption of cobalt in batteries electric vehicles (EV) and, through a series of communicating vessels, an increase in the quantities of nickel.
In addition to this favourable change for prices of the « devil’s metal », there were the consequences of its own production difficulties: export embargoes on Indonesian or Philippine nickel ore, very laborious management of the Goro nickel mine in New Caledonia and complications at the Madagascar nickel mine.
In an atmosphere fanned by the pro-oil « rare metals » fake-news, investors saw a weakness to celebrate and bought into nickel’s promising future in the energy transition. Nickel prices have appreciated in successive waves since 2016, from a base near $8,000/T (€6,819) to $20,000 in mid-February 2021. The most optimistic were already envisaging a surge to $30,000, or even $55,000 as in 2007.
Changes in the metallurgical chemistry of batteries
No metal bottleneck, even a strategic metal, has ever stopped industrial production in the same way as the recent one for electronic chips in the automotive industry. But making the price of an EV vary according to erratic changes in the price of copper, aluminum or other components of its battery would be very perilous. That is why carmakers are trying to minimize the impact of raw material costs.
In order to keep the demand for batteries sustainable, their metallurgical chemistry has changed considerably. Just as the world of internal combustion engines has evolved from gasoline, diesel and liquefied petroleum gas (LPG), the world of lithium-ion batteries has changed from the first nickel-cobalt-aluminum (NCA) versions in the United States to nickel-manganese-cobalt (NMC) in Europe and Asia.
Nickel brings energy density, but thermal instability, and therefore risks of explosion with lithium; cobalt brings power and increases the life cycle, while manganese stabilizes the temperature. While the evolution of the NMC cocktail towards less cobalt and more nickel was in line with sustainability, variations in metal prices were a threat to the cost of electric cars.
Iron and lithium abundance
If cars are not to be reserved only for the wealthy, their prices must come down to those of conventional cars. The answer to sustainability and cost is lithium iron phosphate (LFP) batteries. These are produced in China, thanks to a patent partially owned by the CNRS which will partly mature in 2021. They will lower the price of electric vehicles and should ensure their sustainable development.
Far from being dazed by the infox of a « metal war », Elon Musk approved this solution, as early as February 25 on Twitter: » Nickel is our biggest concern for scaling lithium-ion cell production. That’s why we are shifting standard range cars to an iron cathode. Plenty of iron (and lithium)! «
Indeed, production at its Chinese supplier CATL, which has already substituted LFP for NMC in the Tesla 3, was almost 50% iron versus half that in January 2020. Overall, 40% of the batteries put on the Chinese market during January 2021 had iron cathodes compared to only 8% twelve months ago.
Battery chemistry is multiple and heterogeneous
Volkswagen isn’t afraid either. The German carmaker’s battery range would be divided into three segments: iron for the most common models, heavy manganese-loaded for the mid-range and nickel-loaded for special models. Renault is also considering the resurrection of its R5 in electric mode with LFP batteries.
The chemistry of batteries is therefore multiple and heterogeneous. Less expensive, more durable and safer, LFP batteries will probably account for more than 50% of world consumption, compared with 25% at present, because Europe and the United States are lagging behind in this field.
In addition, the other electrode of the battery, the anode, is also undergoing progress which also extends the autonomy by partially replacing synthetic graphite with silicon, thus reinforcing the least expensive solution. Lastly, we should mention the evolution of the shape of battery cells (cylindar, prismatic or pouch), which contributes to making them lighter, reducing their heat and storing more power.
Investment in copper and aluminium
This is why so many changes and potential market losses for nickel in favor of iron sound like a downgrade for the « devil’s metal ». As a result, diagnosing a real threat to its future business ambitions in EV, the world’s leading nickel producer, China’s Tsingshan, decided to offer some of its production at an attractive price to two Chinese customers active in the nickel battery industry, Zhong Wei and Huayou, starting in October 2021.
Investors have reacted by selling their nickel positions, which represent between 25% and 30% of the price, and have reinvested in other metals that are essential to the electrical industry (copper, aluminium). In this context of rising sales of EV and partial substitution of nickel, cobalt and manganese by LFP, a new reading of the situation is required.
This context of an unstoppable rise in electric car sales and partial substitution of nickel, cobalt and manganese by iron requires a new reading. The rise of the Nickel Doctrine of the world’s leading nickel producer, Indonesia, will see its optimistic production forecasts slightly thwarted ; this new perspective also overhangs expensive or fragile mines, particularly in the Pacific, and places a financial limit on their production ; it will also ease the pressure on the growth of mining supply, as there are no major environmentally friendly viable new projects capable of more than doubling world nickel production in a sustainable manner ; it will minimize the price impact of production losses due to production incidents, such as the current environmental difficulties of Russia’s Norilsk Nickel ; it will alleviate the metal working capital requirements of the battery value chain, which is financially burdened by a nickel stockpile of approximately 12 months, between the time the ore leaves the mine and the time the battery is sold to the consumer ; it could handicap European battery producers if they favour nickel and ignore iron ; and finally, it will allow Chinese car manufacturers to attack European markets : They will offer to their consumers a substantial volume of EV equipped with iron batteries at attractive prices.
This reading grid also brings a new deciphering of the circular economy of batteries, because a battery without nickel or cobalt contains little recoverable material paying the cost of recycling; the manufacturer will therefore have to provide for it.
Nickel demand is expected to continue to grow, but in a more measured way than previously anticipated. EV will not be a golden age for nickel, and at $16,000 per tonne, the price is at a satisfactory equilibrium.
Being about 35 times smaller than Bitcoin, it has avoided becoming the victim of a financial stranglehold comparable to that of 2007 and its $55,000 per ton, or similar to the one which currently grips the rhodium market. Rhodium, which is 30 times smaller than Bitcoin, has almost no other market than automotive catalysts. Because of this domination, its price has increased nearly 50-fold since 2016, but its future will pay for this excess.