EV Battery Metal Costs Plunge 60% Amid 22% Growth in Global Demand

EV Battery Metal Costs Plunge 60% Amid 22% Growth in Global Demand
Published on: Oct 28, 2024

Although the growth rate of electric vehicle (EV) sales has slowed compared to the rapid increase in past years, the shift towards electric vehicles continues unabated. Calculated by total battery capacity deployment, the global EV market has expanded by 22% so far this year, while the cost of battery metals has significantly decreased by 60%.

According to consultancy firm Rho Motion, global sales of new energy vehicles grew by 20% year-on-year from January to August this year. However, if you want to understand the demand for battery metals, the total battery capacity deployment is a better indicator compared to EV sales. Data from Toronto-based EV supply chain research firm Adamas Intelligence shows that global new battery capacity reached 505.6 GWh in the first eight months of this year.

During 2021 and 2022, prices for battery metals including lithium, nickel, and cobalt skyrocketed, prompting a rapid increase in new production capacity. It is not difficult to imagine that although demand continues to grow, the subsequent price crashes for these three battery metals due to oversupply forced producers to reduce output and delay new projects.

Beyond supply factors, changes in EV market composition and battery chemistry are also profoundly altering the demand for battery metals.

This year, the global EV market, including plug-in and conventional hybrids, is expected to easily exceed 20 million units in sales, with the rise of hybrid vehicles being the standout highlight. According to Rho Motion, global sales of plug-in hybrid vehicles (PHEVs) grew by 46% year-on-year in the first eight months, while the growth rate of pure battery electric vehicles (BEVs) slowed to 10%.

Compared to battery electric vehicles, hybrid vehicles have smaller battery sizes, thus containing less battery metal.

Data from Adamas Intelligence indicates that global total battery capacity for newly launched plug-in hybrids increased by 70% compared to last year, whereas the growth rate for fully electric passenger vehicles was only 15%. Meanwhile, the average battery capacity of plug-in hybrids rose by 14% to 23 kWh, more than a third of the average capacity of full electric vehicles.

For miners supplying the EV battery industry, the situation remains grim, as the decline in battery metal prices this year has been severe. According to Adamas Intelligence’s analysis, the raw material cost for an average electric vehicle has now dropped to $537, much lower than $1,342 in August 2023 and the monthly peak of over $1,900 at the beginning of last year.

Among all the battery metals, lithium leads the decline, with the sales weighted average value per electric vehicle down 75% over the past year to $236. Cobalt has a value slightly above $46, down 42% compared to August 2023. Manganese is the only battery raw material showing positive growth this year, with an increase of 3%, but still down 8% compared to the same month last year. The value of graphite as an anode material has remained mostly stable, averaging just under $26 per vehicle.

Battery chemistry is also evolving. According to the International Energy Agency (IEA), lithium iron phosphate (LFP) batteries have emerged as new stars of the battery industry, accounting for over 40% of battery demand in 2023, more than doubling the level from 2020. In August this year, LFP batteries accounted for 42% of global deployed capacity, up from 32% during the same month last year.

The only critical metal in LFP batteries is lithium, which does not require nickel or cobalt. Under this trend, the value of nickel in electric vehicle batteries has decreased by 26%. Over the past year, demand forecasts for these two metals in batteries have also been steadily lowered.

Since the 2010s, China has been the only major producer of LFP batteries, but the expiration of core patents in 2022 sparked overseas interest. In contrast, European and American automakers are still continuing to use high-nickel batteries, but this trend may be changing, as companies like Ford and General Motors have shown interest in CATL’s LFP technology.

Cobalt Electric Cars Energy Metals Lithium Nickel