Source: RMIS raw material profiles
In 2016, 54% of global cobalt mine production originated from the Democratic Republic of Congo (DRC), followed by China (8%), Canada (6%), New Caledonia (5%) and Australia (4%). Refined cobalt production comes from China (46%), Finland (13%), Canada and Belgium (both 6%).
Around 90% of global lithium mine output is produced in Chile (40%), Australia (29%) and Argentina (16%), mostly from brine and spodumene sources. Despite the recent fears of shortages and price spikes, the supply of lithium is not expected to be a major issue for the battery supply chain in the short or medium term due to sufficient capacity being available and coming online in the near future. Nevertheless, according to (Roskill, 2019) an increase from current low prices is deemed necessary to support the development of new production capacity. China (45%) hosts the majority of the world's lithium hard-rock minerals refining facilities. Chile (32%) and Argentina (20%) dominate refined lithium capacity from brine operations. For Europe, there are 14 exploration and mine developments in the pipeline in various member states, of which 6 are in a late development stage.
China supplies around 70% of the global production of natural graphite, with the iron and steel industry being the main driver for its demand. About 10% of natural graphite demand (typically higher grades) finds its way to battery anode materials manufacturing. There are a significant number of exploration projects in development. In the end of December 2018 there were 157 identified projects globally, 10 of which are located in Europe, with Finland, Germany and Sweden anticipating an increasing demand. Although being more expensive, synthetic graphite is a viable substitute for natural graphite.
The supply of nickel ore is more diversified compared to lithium and cobalt. Still, two-thirds originate from Indonesia, Philippines, Australia, Russian Federation and Canada. For refined nickel, the main producer is China with about a 30% share followed by Russia, Japan, Canada and Australia. For Europe, the import reliance of nickel is about 56% with about 10 production locations online and another roughly 10 locations in late stage development. All of these are primarily located in Finland and Sweden. However, not all nickel in the global supply chain is suited for Li-ion battery production. Specific new investments are in the pipeline to e.g. produce high purity nickel sulphates feeding the production of nickel based cathode active materials.
More information for each battery raw material, including EU versus global production and the number of new mine development project can be found in the raw material profiles.
In Asia predominantly. China is the major supplier along the whole Li-ion cells supply chain – from raw materials to battery cells. Other key players along the supply chain are Japan and South Korea for processed materials and components, plus South Korea and USA for the production of Li-ion cells. The current Europe contribution to global manufacturing of cell components in Li-ion battery is negligible (<1%) as indicated in below diagram covering the totals for all early battery supply chain stages.
In more detail: a critical aspect is the lack of European capacity to produce important processed materials for Li-ion batteries, such as anode materials and NCA cathode materials. European companies are producing less than 20% of the global volume of NMC and LCO (Lithium Cobalt Oxide) materials, which is deemed insufficient to satisfy the European demand for Li-ion batteries. Finally, refined materials are subsequently converted in battery grade semi-manufactured materials.
Asia, represented by China, Japan and South Korea, delivers 86 % of the processed materials and components for Li-ion batteries globally, with China alone providing 48 %, followed by Japan and South Korea. Europe has a relatively small share of the supply, at 7-8 %. Other countries deliver only 6-7 %, which gives very little margin for supply diversification. In particular, Europe is fully dependent on the supply of processed natural graphite, artificial graphite, NCA cathode material, anodes and separators. The supply concentrations for various stages of the battery value chain is visualised below.
Europe is almost fully dependent on imports of both battery cells, exposing the industry to supply uncertainties and potential high costs. China is definitely the major player in manufacturing Li-ion cells — 66 % of global cell production. Other suppliers are South Korea and the United States of America, with 13 % each. Europe has very marginal production, with 0.2 % of Li-ion cells. Other suppliers provide around 8 % of the global supply, therefore the margin for supply diversification is also limited in this case.
For the production of EV battery packs, the European capacity expected to be available in 2021-2023 will ascend to 40 GWh, increasing from 3 GWh currently in place. In particular, new companies like Northvolt in Sweden, which is planning to ultimately realise 32 GWh of production capacity of battery packs as well as LG Chem in Poland and a few other developments, contribute to this planned production increase. Several of these production facilities are Asian investments. These European numbers compare to a current global capacity of 150 GWh now of which two-thirds are located in China and with an expected amount of 400 to 600 GWh in roughly only 5 years from now! For a more complete overview of planned production capacities, see (Tsiropoulus et al., 2019).
The key investment factor for future mine development projects is a stable price level. This is needed for financial planning and stability in order to commercially realise intended production projects. Mine projects are intrinsically financially risky and the downward price risks significantly reduce incentives to develop the necessary future capacity.
As an example for cobalt, there is significant price volatility and not only recently. The cobalt prices became considerably volatile since the late 1970s. Various events influenced cobalt prices, ranging from de-stocking, geopolitical unrest in the DRC or, recession and concerns over future supply. Since 2000, cobalt demand has risen gradually, driven by strong demand for rechargeable batteries used in portable electronic equipment. The significant price rises seen over the 2002-2004 and 2006-2008 periods were due to supply decrease and uncertainty over future supply sufficiency, linked to a high level of global economic growth supported by strong Chinese demand. The rise in cobalt metal prices was interrupted by the global economic crisis, and prices decreased dramatically between 2008 and 2009 as supply exceeded demand.
In 2017, market expectations about the anticipated substantial demand increase for battery raw materials in view of the xEV penetration prompted a sharp rise of cobalt prices; while the price of cobalt in March 2016 was close to USD 22,000 per tonne, it more than quadrupled within two years to more than USD 90,000 per tonne in March 2018, reaching a 10-year high. Since then, an oversupply of cobalt hydroxide from the Democratic Republic of Congo brought about a period of continuous and drastic price decline; in June 2019, cobalt prices dropped to around USD 30,000 per tonne.
From a short term perspective, Lithium prices rose significantly from mid-2015 onwards, reflecting the very dynamic market developments in e-mobility and industry’s expectations for a sharp rise for demand in the future. Consequently, prices in the small lithium market nearly quadrupled within three years, reaching historical peaks. In particular, the global average price of lithium carbonate was around USD 5,200 per /tonne at the end of 2014, and it rose by 260% to USD 18,900 per tonne in March 2018. However, since then, a strong downward trend for lithium prices is observed. The global average price of lithium carbonate has dropped by 42% in comparison to March 2018 to USD 10,300 per tonne in July 2019.
Technically speaking, there is a strong shift recently in battery manufacturing towards using lithium-hydroxide instead of lithium-carbonate.
The industry has to deliver supply growth to fuel the forthcoming wave of electric vehicle market penetration. The supply growth can only be sustained by functioning economics. However, current prices are providing limited incentive to develop much of the necessary capacity currently being evaluated or in the pipeline, and that in turn could impact future supply. The current price levels may not support the development of new capacity.
For more information on the overall cost development of Li-ion batteries for e-mobility and energy storage, see this recent JRC publication (Tsiropoulus et al., 2019).