The rechargeable electric vehicle (EV)battery market is preparing for two great unknowns: the extent of U.S. and European Union sanctions against Russia for its war in Ukraine, and the long-term trajectory of nickel prices that recently hit record highs in response to the conflict.
Although the primary driver of demand for nickel is its usage in stainless steel production and rechargeable batteries account for less than a fourth of nickel consumption, within the EV market nickel plays a crucial role. Most Li-ion batteries rely upon nickel, according to the Nickel Institute, and the composition of both nickel cobalt aluminum (NCA) and nickel manganese cobalt (NMC) battery cathodes is approximately 80% nickel.
Last year, 54% of global EV battery capacity deployed on roads used in new plug-in electric vehicles contained such high-nickel cathode chemistry, according to Adamas Intelligence.
In 2021, high-nickel chemistry EV batteries prevailed throughout the U.S. and Europe. Across Asia-Pacific, there was nearly equal usage of high-nickel, low-nickel, and no-nickel chemistries, according to Adamas.
Lithium ion battery cell prices fell steeply between 2014 and 2021, but availability concerns and raw material prices had led to forecasts, even before Russia invaded Ukraine, that battery cell prices would rise this year. The current nickel market disruptions could accelerate interest in adoption of no-nickel EV batteries, such as those with lithium iron phosphate (LFP) cathodes, which can be less expensive to produce than nickel-based batteries.
As of 2021, China manufactured 95% of the world’s LFP-based batteries. However, last year, major U.S. and European automakers announced plans to ramp up usage of LFP-based batteries, and President Biden has urged U.S. carmakers to relocate more of their battery supply chain back to domestic factories.
Yet the nickel-based EV battery market might avoid long-term headwinds, especially if Indonesia and the Philippines increase nickel production or China agrees to absorb Russia’s nickel exports. Manufacturers seeking to assess how these factors could impact their capital and M&A strategies may benefit from the perspective of objective experts in renewable energy.
Viewpoint | A Stephens Inc. Economic and Financial Commentary - July 1, 2022...