LONDON — Accelerating sales of electric vehicles have fueled a rush for nickel, cobalt and lithium, pushing battery material prices to multi-year highs.
The abandonment of thermal engine cars (ICE) in favor of electric vehicles is part of the energy transition and efforts to reduce carbon emissions.
More than 6.36 million electric vehicles were sold last year worldwide, up from 3.10 million in 2020, according to data from Rho Motion. China accounted for half of the total last year and 40% the year before.
Nickel shortages have led to drawdowns on stocks in London Metal Exchange-licensed warehouses, which, at 88,182 tonnes, have fallen 65% since April last year.
More relevant are stocks of bagged briquettes, easily crushed into small particles and dissolved in sulfuric acid to make nickel sulphate for batteries, at 65,676 tonnes, down 67% since last April.
Analysts say most of that briquette was shipped to China, which controls the electric vehicle supply chain.
Wood Mackenzie analyst Andrew Mitchell estimates total nickel demand at 2.8 million tonnes last year, of which 69% was used to make stainless steel and 11% to make batteries, compared to 71% and 7% respectively in 2020.
Mitchell expects batteries’ share of nickel demand to reach 13% this year. “We are looking at higher average prices this year.”
Nickel hit $24,435 a tonne last week, the highest since August 2011. It is expected to fall later this year as supplies increase.
Macquarie’s Jim Lennon expects nickel supplies to rise 14.5% this year to three million tonnes and a surplus of 43,000 tonnes from a deficit of 159,000 tonnes in 2021.
Coronavirus lockdowns in southern Africa have created bottlenecks that have delayed shipments to China from the Democratic Republic of Congo, which accounts for more than 70% of global supplies.
“Chinese imports of cobalt hydroxide were up just 2.5% to 82,100 tonnes last year compared to 2020, meaning domestic stocks have fallen significantly,” said analyst Caspar Rawles. at Benchmark Mineral Intelligence (BMI).
BMI forecasts total cobalt demand of 177,500 tonnes this year, of which 104,000 tonnes will be consumed by the battery sector.
Cobalt prices, at around $70,000 a ton, are at their highest level since July 2018. Traders expect further gains as Chinese consumers restock.
Shortages have pushed lithium carbonate prices to record highs above $50,000 a ton in China, according to BMI.
Lithium carbonate is used for lithium iron phosphate (LFP) batteries. Sales of electric vehicles using these batteries have accelerated in China.
The lack of investment in capacity due to lower prices in the three years to 2021 means shortfalls are likely for a few years.
“Supply is struggling to keep up with demand, given the long lead times to bring first production from lithium resources to market,” said BMI analyst George Miller.
Electric vehicle batteries can use lithium carbonate or lithium hydroxide. The industry generally speaks of lithium carbonate equivalent (LCE) which contains both.
BMI estimates lithium carbonate equivalent demand at 610,000 tonnes this year, up from 490,000 tonnes last year, and a shortfall of 26,000 tonnes from a shortfall of 12,000 tonnes.