LONDON : Increasing sales of electric vehicles have caused a scramble for nickel, cobalt and lithium, which has led to the price of battery materials to multi-year highs.
It is part of the energy transition to reduce carbon emissions by phasing out internal combustion engine ICE cars in favor of electric vehicles.
More than 6.36 million electric vehicles were sold last year, compared to 3.10 million in 2020, according to data from Rho Motion. China accounted for half of the total last year and 40 per cent the previous year.
Shortages of nickel have resulted in the draw on stocks in London Metal Exchange approved warehouses, which have at 88,182 tonnes dropped 65 per cent since April of last year.
More relevant are a stock of bagged briquette, which is easily crushed into small particles and dissolved in sulphuric acid to make nickel sulphate for batteries, at 65,676 tonnes, down 67 per cent since April.
Most of this briquette has been shipped to China, which controls the electric vehicle supply chain, according to analysts.
Wood Mackenzie analyst Andrew Mitchell estimated total nickel demand at 2.8 million tons last year, of which 69 per cent were used to make stainless steel and 11 per cent to make batteries in 2020, from 71 per cent and 7 per cent respectively.
We are looking at higher average prices this year. The highest level since August 2011 was Nickel, hitting US $24,435 a tonne last week. It is expected to retreat later this year as supplies ramp up.
Macquarie's Jim Lennon expects to increase nickel supplies by 14.5 per cent this year to three million tons and a surplus of 43,000 tons from a deficit of 159,000 tons in 2021.
In southern Africa, bottlenecks in southern Africa caused delays in shipments to China from the Democratic Republic of Congo, which accounts for more than 70 per cent of global supplies.
Domestic stocks were down considerably due to the fact that Chinese imports of Cobalt Hydroxide only increased 2.5 per cent to 82,100 tons from 2020, according to Benchmark Mineral Intelligence BMI analyst Caspar Rawles.
BMI expects total cobalt demand to be 177,500 tonnes this year, of which 104,000 tonnes will be consumed by the battery sector.
Cobalt prices are at their highest level since July 2018, and have been at around US $70,000 a tonne since July 2018. As Chinese consumers restock, traders expect further gains.
According to BMI, the prices of lithium carbonate have hit record highs above US $50,000 a tonne in China.
Lithium carbonate is used for lithium iron phosphate LFP batteries. In China, sales of electric vehicles that use these batteries have gone up.
The slump in prices in the three years to 2021 means deficits are likely to be there for some years due to lack of investment in capacity.
Supply is struggling to keep up with demand, given long lead times to bring the first production from lithium resources to market, said George Miller, BMI analyst.
Lithium carbonate or lithium hydroxide can be used in electric vehicle batteries. The industry usually talks of the lithium carbonate equivalent LCE, which contains both.
BMI estimates demand for lithium carbonate equivalent at 610,000 tonne this year, up from 490,000 tonne last year, and a deficit of 26,000 tonne from a shortfall of 12,000 tonne.