ENERGY REVOLUTION

What

Rechargeable battery demand is continuously evolving. While demand from consumer electronics such as video cameras, laptops and cell phones have gradually increased, the rise of electric vehicles has caused an exponential increase in lithium-ion battery demand.

 

Source: Bloomberg New Energy Finance
Source: Benchmark Mineral Intelligence 2018
The Energy Revolution is not only about the environment. It’s also about performance, and more importantly, ABOUT ECONOMICS. Solar and wind energy are the cheapest sources of power ($100/MWh and $50/MWh, respectively), and costs continue to fall.

Cost parity for storing this cheap energy is the tipping point of the energy revolution—with the input battery metals and their respective “power ores” analogous to the Saudi Arabian oil fields.

Battery costs have also declined consistently over the past decade. Since 2014, battery costs have declined 124%.

WhY

There is pressure from regulators to reduce carbon emissions from fossil fuels. Governments are supporting a move towards electric vehicles by providing purchase incentives, grants and tax credits. As result, manufacturers are committing to produce electrified versions of their current models. Volkswagen AG, for example, plans on spending $40 billion by 2030 to electrify their current range of models. General Motors Company outlined their plan on introducing new electric vehicles over the next half-decade.
Source: Benchmark Mineral Intelligence 2018

WhEN

The decline in lithium ion battery price is reducing overall EV price point, and price parity is expected to be reached by 2021-2022.

We are expecting to see tremendous growth in EV sales—especially after price parity with traditional ICE vehicles in 2022. By 2040, Bloomberg New Energy Finance estimates that EVs will account for 35% of all new vehicle sales—while today, EVs only account for 1% of the same.

We are expecting to see tremendous growth in EV sales—especially after price parity with traditional ICE vehicles in 2022. By 2040, Bloomberg New Energy Finance estimates that EVs will account for 35% of all new vehicle sales—while today, EVs only account for 1% of the same.

Moving forward, not only is electric car demand set to increase, but also commercial vehicles such as busses and trucks. The electrification of commercial vehicles is being driven by China. China replaces the equivalent of London’s entire bus fleet with electric buses, every 5 weeks.

Supply & Demand

Batteries will evolve with technology and price. Cobalt and nickel are two key ingredients in battery chemistries. Different chemistries exist, depending on the usage of the battery. “NCA” batteries are commonly used in Tesla vehicles. NCA consists of 80% Nickel, 15% Cobalt, and 5% Aluminum oxide. NMC batteries are the most common type of batteries in EVs and are used by majority of the mainstream automobile manufacturers. NMC batteries consist of nickel, manganese and cobalt, in varying proportions. NMC batteries have evolved from NMC111—equal parts nickel, manganese and cobalt—to NMC622—6 parts nickel, 2 parts manganese and 2 parts cobalt. Research is being done to achieve NMC811—further increasing nickel content and reducing cobalt and manganese content.

Data Source: BMI Research – Industry Trend Analysis

Cobalt Supply & Demand

Majority of cobalt is mined as a by-product of copper & nickel mines, with global supply dominated by the high-risk DRC. Furthermore, only half of all cobalt produced is used for manufacturing batteries, and this is expected to increase as demand from electric vehicles increases.
Data Source: USGS
We’re currently expecting a deficit in cobalt production, and moving forward this deficit is only expected to increase. The world needs a safe & stable supply of cobalt—a supply chain that can be accurately traced in a jurisdiction that is favourable to mining.

Nickel Supply & Demand

Although cobalt is expected to remain a critical component, with price and supply constraints, nickel will inevitably be supplemented for it. BUT it is important to note that cobalt will never fully be engineered out of batteries—the amount only reduced.

Nickel is a much deeper market, but one that has not experienced the hockey stick price growth of cobalt and lithium. Nickel’s time is coming.

Data Source: USGS
The nickel market is bifurcated, with 55% of nickel production from Class 1—high quality, sulfide and limonite sources. Furthermore, 69% of nickel supply is attributed to stainless steel production. Both Class 1 and Class 2 sources feed stainless steel demand.

We are also currently experiencing a nickel supply deficit, consistently drawing down on warehouse inventory. Hence, nickel prices have slowly been increasing since 2015.