With the growing push for electric vehicles (EVs) by major automakers, a fierce competition is emerging in the battery materials sector. The production of EV batteries relies heavily on key raw materials such as lithium, nickel, cobalt, and graphite, with some models even incorporating rare earth elements. This has triggered a surge in demand for these critical resources, leading to significant price fluctuations and supply chain challenges.
Last year, the prices of battery-related materials skyrocketed, with the cost of cobalt from the Democratic Republic of the Congo rising by over 190% in just 18 months. This volatility has raised concerns among car manufacturers and battery producers, who are now seeking long-term supply agreements with major mining companies.
As the number of electric vehicles increases and governments worldwide promote greener transportation, the shift from traditional internal combustion engines to electric powertrains is accelerating. This transition is expected to drive a massive increase in demand for battery metals, including lithium, cobalt, and nickel. According to the International Energy Agency, global EV numbers reached 2 million in 2016, and it's projected that this figure will surpass 40 million by 2040. In response, several major mining firms are reorienting their operations to focus on the lithium-ion battery market.
BHP Billiton, one of the world’s largest mining companies, recently called 2017 a "tipping point" for the EV industry. Meanwhile, Chinese automaker Great Wall Motor has signed a five-year agreement with Australian miner Pilbara Minerals to secure lithium supplies. Financial speculators have also entered the fray, with companies like Cobalt27 stockpiling over 2,000 tons of cobalt, while Chinese hedge funds are also accumulating large reserves.
A major challenge remains the limited supply of cobalt, which is primarily sourced from the Democratic Republic of the Congo, one of the world’s poorest nations. UBS analysts predict that global cobalt demand could double by 2020, reaching nearly 200,000 tons annually. To prevent future shortages, new mining projects must be developed quickly, but this process is complex and time-consuming.
Although lithium is more abundant than cobalt, short-term supply gaps are still expected due to delays in new mining projects. Goldman Sachs estimates that lithium demand will grow more than fourfold by 2025, reaching 779,000 tons. However, expanding production faces significant hurdles, including environmental concerns and regulatory challenges.
Currently, most lithium is extracted from hard rock in Australia and brine deposits in South American deserts. New mining opportunities are limited, with Argentina being a primary target. While Bolivia holds vast lithium reserves, its deposits contain high levels of magnesium, making them less suitable for high-quality battery production.
In addition to supply issues, the future of battery technology remains uncertain. Battery manufacturers are actively reducing cobalt content in their products due to its high cost and supply risks. For example, UK-based Johnson Matthey recently announced a new battery material that uses lithium and nickel while significantly cutting down on cobalt. Nickel is not only cheaper—costing about one-sixth of cobalt—but also offers better performance. Analysts at Liberum Capital estimate that demand for battery-grade nickel could rise from 75,000 tons in 2023 to 400,000 tons by 2025, depending on the specific battery chemistry.
Looking ahead, many battery companies are exploring ways to redesign their products for greater efficiency and sustainability. British tech giant Dyson is planning to enter the EV market in 2020, offering vehicles equipped with solid-state batteries. These advanced batteries use solid electrolytes instead of liquid ones, offering improved safety and energy density. With continued innovation and investment, the future of electric mobility looks promising, but the journey to a fully sustainable and stable supply chain remains challenging.
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