Thursday, August 3, 2017

Batteries: Manufacturers Are Reducing the Amount of Cobalt Used In Electric Vehicles

This isn't the disruption that Mr. Musk fears will make obsolete his Gigafactory approach but it does point up a couple realities:

1) There will be a lot of companies making batteries for electric vehicles.
2) As the old-timers say about commodities: "The cure for high prices are high prices." After a 150% run like cobalt just had you will see substitution as in this story or increased supply as with Glencore spending a half billion to un-mothball a mine in DR Congo, or both.

More after the jump.

From Reuters via CNBC August 3:

UPDATE 1-Asian battery makers eye nickel top-up as cobalt price bites
* Cobalt prices double on demand, supply shortage
* Battery makers turn to cheaper nickel to cut costs
* Electric vehicle batteries to drive market growth (Updates to add graphic)

SEOUL, Aug 3 (Reuters) - Soaring cobalt prices are prompting Asia's top battery makers to tweak the recipe for lithium-ion batteries used to power electric cars and mobile phones - reducing the amount of cobalt and adding more nickel.

With forecasts for electric vehicle (EV) battery demand to jump 20-fold over the decade to 2025, manufacturers are looking to cut back on more expensive components. Cobalt has more than doubled in price over the past year on strong demand and a supply shortage.

Popular nickel, manganese and cobalt (NMC) lithium-ion batteries typically employ a ratio of 60 percent nickel to 20 percent cobalt and 20 percent manganese, or 6:2:2, said South Korea's SK Innovation, which aims to change the composition of these cathode materials to 80 percent nickel, 10 percent cobalt and 10 percent manganese.

"We are trying to change the ratio to 8:1:1, from 6:2:2. This is not producing a completely new product, rather it's part of efforts to respond to changing market conditions," a spokesman said.
Cobalt prices spiked to average $58,549 a tonne in July - about six times the cost of nickel.
The price hike has been driven by higher demand and a supply shortage sparked by conflict in the Democratic Republic of Congo, which provides nearly 60 percent of the world's cobalt, also raising issues of security of supply.

Surging demand for EV batteries could add some 10 percent to 40 percent to current nickel demand by 2025, depending on the success of efforts to replace cobalt with nickel, UBS said in a recent report.

Asia dominates global EV battery shipments. Japan's Panasonic Corp accounted for nearly 30 percent of shipments in the first five months of this year, while South Korea's two top producers - Samsung SDI and LG Chem - made up more than 20 percent, according to SNE Research. China's BYD Co had just over 8 percent of the market.

Samsung SDI said it expected the amount of cobalt per battery unit to decrease in the long term to about half of current levels across the industry....MUCH MORE
On the LME prices are rolling over:


And in fact both the bid and offer curves are in backwardation.
We were fortunate to catch most of the move but for now it looks like cat videos are the play du jour.
Because cobalt is associated with both copper and nickel mining there are some interesting dynamics—with the recent leg higher in copper ($2.50 to $2.85) and the battery guys looking for more nickel, there should be more byproduct supply.

July 5
"Psst...wanna buy some cobalt? Just don't tell the auto guys!" (KBLT: Canadian venture exchange)
June 29
The Cobalt Trade Worked Out, On To Ruthenium
Feb. 2017 
"Electric-car makers on battery alert as hedge funds stockpile cobalt"
May 2016
Why the CIA Reads The Financial Times (and you should too) Tesla and Cobalt
A couple weeks ago we posted a seemingly innocuous piece with a boring headline: "'Freeport Sinks On Sale of Africa Copper Mine To Chinese' (FCX; LUN.TO)".
I figured there were at best two thousand people in the whole world who knew or cared about the back story and real import of what was going on so I'd just drop it as an Easter egg for the cognoscenti and other assorted electric vehicle/conflict mineral/African warlord/Elon Musk/extractive industry/Génocidaire hunter/U.S. political corruption watchers to find.
Well now that cat's out of the bag.
Big kudos to the FT's Henry Sanderson for recognizing one hell of a story and a small request for the Financial Times: Can you tell us what the old ENRC is up to these days?
From The Financial Times, May 25:
China plays long game on cobalt and electric batteries...
 May 2016
"Freeport Sinks On Sale of Africa Copper Mine To Chinese" (FCX; LUN.TO)
Sept. 2016

DR Congo’s State Mining Company Submitted An Offer to Buy Freeport McMoRan's Stake In Tenke Fungurume Copper, Cobalt Mine (FCX;
Sept. 2016
Lundin Mining Granted Second Extension To Bid For Giant DR Congo Cobalt/Copper Mine
So waddya think?
Is Tesla going to stick with current battery technology and use cobalt or will one of the competing approaches prove so superior that the value of Tenke Fungurume falls 60%.

Follow one road and all Europe may be free and the life of the world may move forward into broad, sunlit uplands. But if we fail, then the whole world, including the United States, including all that we have known and cared for, will sink into the abyss of a new Dark Age made more sinister, and perhaps more protracted, by the lights of perverted science.

No pressure.
And no idea why Churchill is showing up in the intro to a mining story.

It may be as simple as always thinking it would be nice to walk into the Monday morning meeting and, just once, have someone acknowledge last week's performance with "This was their finest hour".
Just once....