Electric Vehicles in View

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Electric vehicle battery-makers are reducing the amount of cobalt in their products in an effort to cut costs and avoid the stigma of buying a product fraught with troubling labor practices. But cobalt demand will soar anyway, thanks to the sheer volume of rising electric vehicle sales.

EVs will be a key part of the global drive to decarbonize the economy, and battery-makers face increased scrutiny from customers and investors. That means trying to cut back on purchases from Congo, which has a history of troubling cobalt mining labor practices, but is the world's largest producer of the metal by far. EVs can be made cheaper by reducing the contained cobalt, which is one of the most expensive parts of the battery, with prices jumping to more than $80,000 per tonne in March, according to S&P Global Market Intelligence.

Battery-makers have heavily invested in developing new chemistries that use less cobalt than ever before, reducing their demand for the metal. But global annual passenger plug-in EV demand is expected to grow 127% to nearly 22 million vehicles by 2026, compared to 9.7 million anticipated sales in 2022, according to Market Intelligence data. That surge in demand will likely overwhelm any declines in cobalt demand generated by changing battery chemistries.

"Despite the prevailing transition to lower cobalt cathode chemistries and the growing share of non-cobalt chemistries, the cobalt bearing [nickel-cobalt-manganese] chemistry will remain the dominant chemistry in the foreseeable future," said Andries Gerbens, a physical trader at Darton Commodities. "Furthermore, the sheer absolute growth in EV sales will mean that EV-related cobalt demand will continue to accelerate in the years to come."



Less cobalt, cheaper batteries

A key motivator for battery manufacturers to move away from cobalt is the high cost compared to other battery inputs. Cobalt prices have exceeded $50,000/t in 2021 and 2022, spiking to $82,840/t in March 2022, according to Market Intelligence data

The S&P GSCI Electric Vehicle Metals seeks to measure the performance of the tradeable metals used in the production of an electric vehicle (EV) and is designed to have the flexibility to respond to changes in EV technology and the adoption of new metals futures contracts.

Automakers do not have enough metal to meet demand for electric vehicles, even as customers facing high fuel prices clamor for more.

U.S. gasoline prices surging above $4.00/gal on average are making EVs—already coming off a record market share of 6% in the fourth quarter of 2021—even more financially attractive to drive, say vehicle trade groups.

Charging an EV costs one-fifth to one-half of refueling a comparable gasoline internal combustion engine (ICE), on a per-mile basis, in the U.S., said the Zero Emission Transportation Association (ZETA) in a report released in early March.

Comparing models of popular SUVs, pickups, and sedans, ZETA said that the EVs are significantly less costly to drive in each category. The prices below are based on a retail gasoline price of $4.32/gal (as of 10 March) and a $0.14/KWh for power (December 2021).

"This month's Consumer Price Index shows once again that gas prices are surging, which has been exacerbated by Putin's invasion of Ukraine. American families are losing money at the pump to a commodity that is increasingly unpredictable and unaffordable in an already-expensive pandemic year," said Joe Britton, executive director of ZETA. "Our analysis shows that American consumers don't have to choose between driving their car or saving money. Electric vehicles are affordable now."

However, ICE engines still offer substantial advantages on driving range.



How will consumers react?

Volatile gasoline prices do make EVs more attractive to consumers, commented Mike Fiske, research and analysis director at S&P Global Mobility. "The larger question is whether consumers view this spike in cost as being temporary or not," he said in an email to Net-Zero Business Daily by S&P Global Commodity Insights.

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China maintained its vast dominance in the global electric vehicle market by selling a record 3.3 million cars in 2021, while the U.S. ended a two-year slump to see EV sales double, according to newly released data.

Worldwide EV sales doubled year over year in 2021 to 6.6 million, the International Energy Agency reported in its Global EV Outlook for 2022 on May 23. Some 630,000 plug-in battery and hybrid electric cars were sold in the U.S. in 2021, twice as many as the year before. In Europe, 2.3 million EVs were sold.

In all, there were 16.5 million electric cars on the road worldwide in 2021, three times more than in 2018, the agency reported. The IEA and many nations are looking to EVs to replace combustion engines to slow climate change. In the U.S, transportation is the largest source of carbon dioxide emissions, accounting for 33% in 2020.



The National Oceanic and Atmospheric Administration reported separately on May 23 that greenhouse gas emissions from human activities trapped 49% more heat in 2021 than in 1990, the baseline year for the initial Kyoto climate protocol.

But so far, EV production and uptake have been dominated by China and the EU. Those two regions accounted for 85% of the world's sales in 2021, the IEA said.

European governments plowed the equivalent of $12.5 billion into EV subsidies and tax waivers in 2021, and China $12 billion, the agency's report found.

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