Cobalt demand to maintain solid growth despite EV makers seeking to use cobalt-free batteries

SHANGHAI, Feb 19 (SMM) – Demand for cobalt is expected to maintain solid growth in the coming years, even as electric vehicle makers are seeking to use batteries that do not contain the pricey material to lower production costs.

Concerns over the prospects of cobalt demand grew after Reuters reported on Tuesday that Tesla is in “advanced stages of talks” to use CATL’s cobalt-free, lithium iron phosphate (LFP) batteries in cars made at its Shanghai gigafactory.

Anther EV producer—BYD—is also betting on LFP batteries. BYD Auto Sales' GM said in November that the first model with LFP super battery might be presented end of 2020. The battery is expected to have 1.2 million km life cycle, allow more than 600 km range, cut costs up to 30% and have 50% higher volumetric density.

The two EV giants’ intention to adopt cheaper LFP batteries in their passenger vehicles comes as the Chinese government has significantly scaled back subsidies for new energy vehicles and as EV sales growth in China is losing momentum.

EV manufacturers usually use nickel-cobalt-aluminium (NCA) or nickel-manganese-cobalt (NMC) batteries on passenger vehicles because of their higher energy density, which is critical in determining how far an EV can drive on single charge.

Compared to NCA or NMC batteries, LFP batteries perform worse in low temperature resistance and have lower energy density. The proportion of installed LFP battery capacity in passenger vehicles has been trending lower in China in recent two years.

While EV producers’ focus is attuned to LFP batteries, LFP batteries are unlikely to overtake ternary batteries to the mostly adopted batteries in EPVs in at least next three years, in anticipation of wider adoption of high-nickel ternary batteries and technological bottlenecks in LFP batteries.

The EV market is expected to remain the major driver of cobalt demand growth till 2022, and demand for cobalt in EVs is expected to grow at an annual rate of about 23%.

The rise of 5G, meanwhile, will boost consumer device’s demand for cobalt, which is likely to increase at an annual rate of 5-8% in the next three years.

Tesla’s plant in Shanghai is estimated to consume 1,120 mt of cobalt a year, accounting for about 1% of cobalt demand in China, according to calculations by SMM. The plant now produces about 3,000 Model 3 a week, and each unit requires 7.8 kg of cobalt.

SMM data showed that the proportion of EV’s demand for cobalt to the total cobalt demand in China increased to 25.8% in 2019 from 11.7% in 2016, while the portion for consumer device declined to 52% last year from 67% in 2016.