By Richard Stubbe
(Bloomberg) --
The electric-vehicle boom will drive the world's cobalt and lithium markets from minor to crucial by 2030, a report by Bloomberg New Energy Finance concludes.
The two metals, key components in the batteries that power EVs, have doubled in price over the past two years as EV sales have climbed to more than 1 million a year, with 1.59 million expected to be sold in 2018. BNEF analysts Logan Goldie-Scot and James Frith said they expect the markets for cobalt and lithium to adjust to meet demand over the next few years, which will require significant investment to enable smaller companies to find and extract resources.
Lithium prices have topped $20,000 a metric ton in Asia.
Billions in additional capital is needed in the sector. "We expect more direct investment in the upstream supply chain as supply constraints become a greater concern for key customers such as automakers and battery manufacturers," Goldie-Scot and Frith wrote.
The adjustments may take the form of finding new supply or lessening demand. As lithium hydroxide, the preferred feedstock for making batteries, soared beyond $20,000 a metric ton in 2017 in Asia from $8,800 at the end of 2015, production capacity surged as companies opened or expanded mines.
Demand for cobalt is more elastic than for lithium because it's easier to replace. When cobalt jumped, manufacturers took steps to reduce their need for the metal, most of which is mined in the politically volatile Democratic Republic of the Congo, by shifting to chemistries that use less of it.
"By 2030 we expect nickel-manganese-cobalt 811 batteries to make up 40 percent of the market for passenger vehicles, with NMC 111 nonexistent," the analysts wrote. That would reduce the percentage of cobalt in a battery to 10 percent from more than 30 percent.
The strong demand outlook has prompted a number of investments affecting lithium and cobalt supplies this year:
