Electric cars sales drive up nickel, cobalt and lithium prices.
More than 6.36 million electric vehicles were sold last year globally compared with 3.10 million in 2020, data from Rho Motion shows. China accounted for half of the total last year and 40 percent the previous year. Electric car sales surged a whopping 160 percent in China in 2021, helping to create what could become a shortage of some key metals needed to make them, such as nickel, cobalt and lithium.
Reuters recently reported that the accelerating sales of electric vehicles have fuelled a scramble for nickel, cobalt and lithium, propelling prices of the battery producing materials to a year high.
The accelerated phasing out of the internal combustion engine (ICE) which are petrol powered cars in favour of electric cars is part of the energy transition and efforts to cut carbon emissions (but is it really cutting emissions when charging an electric car comes from the power grid).
Meanwhile, the China Association of Automobile Manufacturers reported that plug-in hybrid sales more than doubled to 600,000 units in 2021, surpassing the estimated 480,000 units that Cox Automotive reports were sold in the US in the same year.
The jump in sales is largely thanks to Beijing’s efforts to promote electric vehicles by requiring auto manufacturers to produce them and extending state subsidies that had been set to expire at the end of 2020. These results stand in stark contrast to slow growth of just 3.8 percent for overall new car sales.
The London Metal Exchange reports that the global nickel inventory has fallen 65 percent to 88,182 tons since April 2021, while the bagged briquette inventory has fallen 67 percent to just over 65,000 tons over the same period. Bagged briquette is easily crushed into small particles and dissolved in sulphuric acid to make nickel sulphate for batteries.
Wood Mackenzie analyst Andrew Mitchell estimates total nickel demand was 2.8 million tons in 2021 which was 11 percent of which was used to make electric car batteries, up from just 7 percent the year prior. At over USD24,000 a ton, nickel prices have climbed to their highest levels since 2011.
Meanwhile, electric car battery manufacturers say that prices have been increasing every quarter since the beginning of 2021. Compared to January 2020, cell prices have seen a hike of almost 30 percent. The cell constitutes 70 percent of the cost of batteries.
So a 30 percent rise in its cost leads to a 40 to 50 percent increase in the price of the battery. So, the question we want to ask is this, will the electric car battery crisis become the next ‘semiconductor chip shortage’?
The price of raw materials needed to make an EV battery is soaring which is putting the price sustainability of electric cars under stress.
