Battery metal demand set to rise substantially by 2030: IEA

Demand for battery metals is expected to increase substantially by 2030 and exceed projections, especially lithium, according to International Energy Agency's energy analyst Leonardo Paoli on May 23, who added that additional investment into mineral extractions need to be happening today.

Higher battery demand had already resulted in the price of battery metals skyrocketing, with the price of lithium eight times higher than at the start of 2021, said Paoli at a webinar for the launch of the IEA's Global Electric Vehicle Outlook 2022.

Platts seaborne lithium carbonate and lithium hydroxide assessments were assessed at $76,000/mt CIF North Asia and $80,200/mt CIF North Asia respectively May 23, up from $6,350/mt CIF North Asia and $9,000/mt CIF North Asia on Jan. 8, 2021, S&P Global Commodity Insights data showed.

Rising demand and higher prices begged the question whether the world would have enough metals and minerals to support the global electrification ambition, Paoli said.

Under the IEA's Announced Pledges Scenario, or APS, based on existing climate-focused policy pledges and announcements, electric vehicles are presumed to represent more than 30% of vehicles sold globally in 2030 across all modes.

To reach this, global battery capacity will need to expand, with Paoli noting that, today the world was manufacturing around 340 GWh/year of batteries and by 2030, the requirements would be roughly 10 times higher to produce that amount of batteries needed, requiring full output from around 100 gigafactories.

According to the APS, the supply of some minerals such as lithium will need to increase by up to one third by 2030 to match the demand for EV batteries to satisfy global pledges and announcements.

The IEA found that average battery prices fell 6% in 2021 to $132/kWh, a slower decline than the 13% drop in 2020 and expected that, if metal prices continued to remain high in 2022, battery packs would become 15% more expensive than in 2021, all else being equal.

Evolving battery chemistries

However, Paoli pointed out that there were several possible battery cell chemistries available for EVs, with battery cathode chemical compositions having evolved over the past five years and expected to continue to do so thanks to research and innovation efforts.

According to the report, nickel-based chemistries, such as nickel-manganese-cobalt and nickel-cobalt-aluminum, were dominant in the EV battery market in 2021, making up 75% of cathode material demand share due to their long driving range advantage, although LFP' share over the last two years had increased to 25%, driven by the increased uptake of EVs in China.

"Currently most batteries have cathodes with high contents of nickel, but LFP [lithium iron phosphate], which is a chemistry that does not require nickel or cobalt, has doubled its market share in 2021," Paoli said.

The IEA expects the share of LFP batteries to increase to 2030 due to a number of innovations, such as the cell-to-pack technology, that are making this chemistry well suited for entry- and mid-level EVs, he added.

There were also other new and innovative chemistries, including manganese-rich cathodes and sodium-ion batteries that were expected to start gaining market share by 2030, he said.

"If battery metal markets remain tight and commodity prices remain high, it is possible that automakers will shift more rapidly to chemistries that are less intensive in terms of critical metals and they will speed up their research and development for alternative chemistries," Paoli told the webinar.

The IEA explored this possibility by developing a constrained chemistry case, wherein alternative chemistries enter the market more rapidly and LFP takes a larger share of demand.

In this case, Paoli said the gap between expected supply and demand changed, with cobalt and nickel demand expected to become lower than expected supply.

For nickel, Paoli cautioned that, even if global supply of nickel did not appear to be particularly short, not all nickel resources could be used for battery manufacturing.

"It is therefore important to develop existing and innovative routes to transform lower grade ores into battery grade nickel," he said.

According to the report, Russia supplies 20% of global high purity nickel, meaning Russia's invasion of Ukraine had created further price pressures.

Lithium investments

For lithium, however, additional investments would still be required, irrespective of the chemistry choices.

According to the report's APS, demand for lithium was projected to increase sixfold to 500 kilotons by 2030, requiring the equivalent of 50 new average-sized mines.

"Therefore governments and market players must closely monitor both the supply and demand side of the equation to anticipate bottlenecks that might occur across the EV supply chain over the coming decade," Paoli said.

Governments would need to develop strong, secure, resilient and sustainable EV supply chains to accelerate EV uptake globally, he said.

"Without this supply chain development, the EV transition will simply not be possible," he said. "Each step of the supply chain must be expanded, but our analysis shows that mineral extraction step is the most critical due to the long lead times that are involved with its expansion, therefore, investments must be made right now to avoid any potential bottlenecks down the line," he added.

The IEA also noted in the report that recycling would be an important part of reducing demand for minerals and, although the impact up to 2030 would likely be small, recycling's contribution to moderating mineral demand was critical after 2030.