The market for lithium-ion (Li-ion) batteries was 62GWh in 2015 and is expected to have exceeded 70GWh in 2016, an increase from just 5.7GWh a decade earlier. Growth has been driven by an increase in the number of applications using them, as well as gains in market share versus other rechargeable battery types. From the 1990s through to the early 2010s, the market was dominately portable consumer electronics, with the transition from mobile phones to smartphones and phablets increasing battery capacity per device even with lower unit sales growth. More recently, growth has been accelerating as the automotive market has started to electrify its powertrains. By 2025, the Li-ion battery market is forecast to reach 223GWh, a CAGR of 14%.
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For nonferrous metals and minerals, before refinement, Roskill estimates 379kt were consumed at a value of US$2Bn in 2015. This was less than one quarter of the overall US$9Bn attributed to Li-ion battery materials cost in that year, and just 12% of overall cell costs, indicating that raw material cost volatility is dampened in final battery costs. However, raw material prices in early 2016 were at recent, even century-long, lows in real terms. Changes in material prices matter more as manufacturing and overhead costs continue to fall, as cell and final pack prices will become more sensitive to raw material prices, exposing manufacturers and users to future rises. A complicated, and often long, supply chain from mine to battery, with generally slow reaction times in the upstream, are also a risk to the battery industry.
Transport to dictate lithium-ion battery market through to 2025
With a strong government drive to increase penetration of hybrid, plug-in and full electric vehicles (xEVs) to meet emissions objectives, together with falling battery costs and improved battery range, Roskill expects the positive trend in xEV sales to increase; the transportation market for Li-ion batteries is forecast to reach 131GWh in 2025, representing a 20.3% CAGR from 2015.
A very similar rate of growth is forecast for energy storage systems (ESS). Emissions objectives again play a role, but so does the economics of electricity grid management where increased storage may reduce other costs relating to generation and to the network. For the consumer, storage offers the opportunity to reduce electricity costs and to benefit fully from self-generation. Roskill forecasts an ESS market of 11.6GWh in 2025, up from 1.8GWh in 2016.
In comparison, the power device and small motive power group is expected to perform quite modestly, with an 11.2% CAGR to 16GWh in 2025. Portable electronics will perform distinctly less well. For this sector Roskill forecasts a 6.6% CAGR to 64GWh. Near-saturation in the key phone and portable computer markets has already meant a tailing off in growth in this sector, a trend which is expected to continue.
By 2025, transportation will account for 60% of the 223GWh Li-ion battery market, ESS 5%, portable electronics 30% and other applications 5%. The accuracy of this forecast will depend largely on how closely developments in xEVs match expectations. Government resolve, cost and performance trends in batteries and the strategy of automotive companies are all important variables here. Similar comments apply also to ESS, another high growth market. High/low scenarios are, therefore, vital to asses the upside and downside risks.
Impact on raw material requirements will be pronounced
Battery cell assembly draws upon a complex supply chain of largely unrelated product groups, within which nonferrous metals and minerals play a major role. Important materials groups include cathode materials, anode materials, electrolyte, separators and current collectors. Li-ion batteries are normally specified by cathode chemistry. The alternative chemistries, and specific formulations within them, offer a very wide range of power, energy, safety and cost options appropriate to different applications.
Nonferrous metals and minerals featuring highly in Li-ion batteries are lithium, cobalt, nickel, manganese, graphite, copper and aluminium. The first four of these are used primarily as active cathode material, although lithium is also used in electrolyte. As such, developments specific to cathodes and collectors are particularly relevant for nonferrous metal material use, while anodes dictate graphite use.
With the growing emphasis on xEV and to a lesser degree ESS markets, demands on materials suppliers are changing. This is very evident in cathode materials, where the market has shifted away from high-cobalt LCO cathode typically used in portable electronics to nickel-rich products, primarily NMC but also NCA. Another xEV material, LFP, has been used extensively in China, but this is now losing ground to NMC and NCA although it remains favourable for HEV and ESS applications.
There will be raw material winners and losers
Li-ion batteries are a crucial market segment for lithium and cobalt already. Lithium, used almost universally as cathode material and also as electrolyte, should reflect the overall forecast materials trend in Li-ion batteries quite closely. However, because of its reliance on high-cobalt LCO cathode material, cobalt is set to perform relatively poorly over the next decade. This is despite quite strong growth in NMC and NCA cathode, containing cobalt but in relatively low volumes. While lithium consumption could triple to 170kt LCE by 2025 in the base-case, cobalt will only see a doubling in demand to 57kt.
Manganese is set to perform relatively well, despite the modest performance of the high manganese content LMO cathode type. Much of the growth will come from NMC cathode material, despite its lower intensity of use than in LMO. Amongst the major metals, nickel is expected to be the best performer. Nickel is a crucial ingredient in NMC and NCA cathode, the fastest growing of the cathode material types. Within NMC, average unit usage of nickel is increasing, as the market shifts from low and mid-Ni type to high-Ni NMC. These considerations together are forecast to take nickel use in cathode material to 67kt in 2025, a CAGR of 15.8%, compared to manganese at 11.5%.
Graphite is the dominant active anode material. Overall market growth in anode material between 2015 and 2025 is forecast at 10.3%py, to achieve a market of 182kt. Graphite is forecast to show a gain of 10%py to 164kt (equal to 247kt of crude product before processing losses). The growth rate is slightly lower because of an increase in other carbon anode materials and some non-carbon as anode material.
Copper is used in Li-ion batteries in collector foil, and in electrical tabs, connections and functional items at cell and pack level. Total copper use is estimated at 95kt in 2015. Roskill forecasts an increase to 273kt in 2025, representing a CAGR of 11.2%. A growing share of complex packs should benefit copper, though the relatively high cost of this material and initiatives to save weight could lead to greater unit reduction in its use than forecast.
Aluminium is also used in collectors and in the electrical installation in the battery cell and pack. It is also used in cell pouches. Total aluminium use is estimated at 65kt in 2015 and is forecast an increase to 179kt in 2025, representing a CAGR of 10.7%.
Alternative market development outcomes for Li-ion batteries to those forecasts above would have direct bearing on the quantity of metal and minerals consumed. For the two markets where Li-ion batteries constitute a major part of the overall market, cobalt and lithium, a difference in outcome would be fundamentally important for the commodity. For nickel, graphite and to a lesser extent copper, developments in Li-ion do matter for the overall commodity market, but not by so much.
A complicated supply chain from mine to battery presents
Nevertheless, for almost all Li-ion battery materials, the product required is highly specific, calling on a particular corner of the wider commodity market concerned; dynamics for particular battery-grade products might be quite different from those of the commodity overall. Most Li-ion battery raw materials feature a long supply chain, where supply bottlenecks are always possible and the unpredictable influence of external interests on the movement of the complex array of materials available must always be considered.
The net result of the industry structure is a potential for materials cost escalation and supply disruption in key raw materials. This applies not only to the battery manufacturer, but also to those further up the supply chain, in particular cathode material manufacturers. Downstream users could overcome the potential difficulties in part through upstream integration and alliances. Adapting process lines to allow flexibility in raw material source or offering alternative end product designs with other raw materials are further means of ameliorating supply chain risk; recyling will likely grow in importance longer-term.
Heavy investment in China in all aspects of the Li-ion battery supply chain, largely by Chinese companies, indicates that in the short-to-medium term China is likely to further advance its global share. Longer term, this may change. With a shift in market emphasis to xEV and ESS with complex battery packs and sizeable markets outside the Asian heartland more production sites in Europe, North America and elsewhere are expected. This is already evident in batteries with investments by Panasonic, Samsung SDI and others. Investments in battery raw materials will continue, but supply will be dictated by natural occurrence and cost, rather than proximity to consumer.
Battery unit costs falling, but raw material prices are a risk
Roskill predicts a reduction in average battery pack cost from US$362/kWh to US$247/kWh between 2015 and 2025. In one sense, this fall in unit price is to be welcomed, as it is only with a continued price reduction that the Li-ion battery market can be expected to increase in size as forecast. A substantial fall in battery manufacturing costs is envisaged over the next decade. One reason for this is an anticipated rise in capacity utilisation once capacity currently under construction is absorbed. High fixed costs in depreciation and R&D will also be spread across a larger production volume. Another reason is that materials are made to go further, a result of using better chemistry, better cell design, or better processing.
At first sight, it may appear that materials costs should not follow the same downward trend as in manufacturing, as commodity pricing is not determined by the logic of the Li-ion battery business. In fact, metals and minerals prices have a relatively small impact on materials cost development, for the following reasons: 1) chemicals products constitute a large portion of materials costs; 2) specific processing of mine-based products adds substantially to value.
For nonferrous metals, before refinement, Roskill estimates a value of US$2.04Bn in 2015. This was less than one quarter of the overall US$8.84Bn attributed to Li-ion battery materials cost in that year, indicating that commodity raw material cost volatility is dampened in final materials costs. In the past though, big changes in materials cost have mattered, especially the extreme price spikes in cobalt in 2007 which led to NMC displacing some LCO use.
Between 2011 and 2015 (and for some into 2016), the trend in metals and minerals pricing was down, with the exception of lithium. This has had some (but quite small) impact on reducing materials costs at cell and pack level. Larger reductions have been evident in processing costs, driven in part by a growing share of Chinese suppliers of keenly priced processed materials. Also, better battery design and reduced processing loss have contributed.
Looking forward, we expect further erosion in processing costs, though much less than in the recent past, and also in materials use through improved chemistry. This will mean a further absolute fall in materials costs per unit of battery capacity. With increases in metals and minerals prices, though, the scale of this reduction will be lessened and the share of materials in cell value should rebound. Roskill forecasts a rise in materials' share of cell value to 58.4% by 2025 (and to 42.6% of pack value), with nonferrous metals and minerals valued at US$7.7Bn, 19% of cell value and 14% of pack value. Understanding raw material market dynamics will therefore become increasingly important for the Li-ion battery value chain going forward.
Roskill will be presenting on raw material trends in lithium-ion batteries at the AABC Europe conference and exhibition in Mainz, Germany starting 30th January 2017. Visit Booth #31 to find out more about our battery raw materials market analysis and consulting.
Roskill has released a new Lithium-ion Batteries: Market Development and Raw Materials report with forecasts out to 2025. It is essential reading for anyone requiring a comprehensive overview of this growing sector, and its raw materials use, both of which are undergoing a rapid transformation.
Lithium-ion Batteries: Market Development and Raw Materials, 1st Edition, 2016 is now available from Roskill Information Services Ltd, 54 Russell Road, London SW19 1QL UK. Click here to download the brochure and table of contents.
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