New policies and access to capital has seen Chinese companies increase the production and marketing of Electric Vehicles during the first half of 2018, pushing the industry into a "new dawn" of battery manufacturing and technology advances, which leads to a global hunt for lithium and cobalt resources.
The latest statistical data published by the PBA (Power Battery Application branch of China) shows that installed capacity on domestic electric vehicles was 4,516MWh (4.52GWh) in May 2018, up 223% from the same year. Amazingly, installed capacity increased quarterly is 22%!
“China sees EVs as the way to assert their global dominance in automotive,” says Venkat Viswanathan, an assistant professor of mechanical engineering at Carnegie Mellon, whose work focuses on batteries. “To make it work you need scale, and they do scale better than anyone else.”
China is already the world's largest electric vehicle maker. With the increase in supply and progress of technology, the cost of NMC batteries is gradually reducing, with safety and reliability improving. Interestingly other battery types have taken a hit, such as Lithium Iron Phosphate. The author has come to know of one major LFP battery manufacturer succumbing to insufficient orders and financial already, when only six months ago they were ranked third in the list of largest battery manufacturers.
No doubt the leading supplier of of new energy vehicles, the power battery industry chain is facing profound changes. With the progress of technology, the cost of three yuan battery is gradually reduced, and the safety gradually improves, which will impact the lithium iron phosphate battery. In this environment, the company also announced that, due to insufficient orders and financial difficulties, all staff and workers were on vacation for six months. Only six months ago, the company ranked third in the top twenty battery manufacturers list.
The battery supply chain is facing profound changes as cobalt and lithium supplies to market continues to be in short supply. Since July 2016, cobalt, a hard, shiny, greyish metal, a by-product of copper and nickel mining, has seen the biggest price increase among various metals used to make electric vehicle batteries, according to Ciaran Roe, global manager of metals pricing at S&P Global Platts.
“Unlike manganese, lithium and nickel, cobalt is limited in supply not just in terms of tonnage but also origin,” he said. “I can’t think of another commodity where supply is so reliant on one origin nation than cobalt.”
Only in April this year did cobalt prices fell for the first time since 2016 by about 2.4% during two months. By the time of release, high-purity electrolytic cobalt metal closed at RMB535,500 (USD 81,382) / ton, and the price has dropped to the lowest point in six months.
Here are some of the events that drove the market last month.
June 1st - Siemens and Northvolt announced a partnership to jointly developed a next-generation of high-quality lithium ion batteries. The project will be supported by Siemens, with an investment of 10 million euros, a mass production of lithium-ion batteries will occur after 2020, and Northvolt will be the preferred supplier of the Siemens lithium-ion batteries.
June 8th - Prime Minister of Democratic Republic of Congo (DRC) signed a new mining law to immediately implement a new mining code without any concessions to industry demands that key provisions be amended. The move could set off a legal battle between the government and major mining companies operating in Congo, including Glencore and Randgold, which previously threatened legal action against the government if their concerns about tax hikes and the elimination of exemptions were not addressed.
June 11th - Vale has reached an agreement that they will produce and sell cobalt to cater for the continuous growth of the electric vehicle market. The deal stipulates that Vale will produce cobalt products from their Voisey's Bay complex in Canada, Vale has been looking for financing to turn the open-cast mining into underground mining and extend the life of the company's mines.
June 13th - The Chinese Academy of Sciences and Technology held a press conference to release major achievements "focusing on the manufacturing technology of transformational nanotechnology". The power density of the multiple power battery monomer, which is developed by the pilot, is above 300Wh, which means that the mileage of the single charge is up to nearly 500km, which is the highest battery capacity in the world. More than 30 battery and electric vehicles manufacturers have applied to form a cooperative relationship with CAS.
June 14th - Although the annual growth rate of lithium demand is still up to 16% in 2025, Citibank analysts believe that lithium production is growing faster and may bring a surplus to the lithium market. Citibank forecasts that global lithium production will increase from 200,000tpa to 400,000tpa in 2020. What is interesting is that in 2017, the supply of lithium exceeded demand by 5%. This figure is expected to rise to 11% in 2018, and 27% in 2019.
June 25th - The Ministry of Industry and Information Technology (MIIT) intends to carry out pilot work of lithium-ion battery recycling in the Yangtze River Delta. According to Mr Gao Yunhu, director of the Department of Energy Conservation and Comprehensive Uutilisation of the Ministry, he has recently led a team to Jiangsu and Zhejiang to carry out research on the recovery and utilisation of Lithium-ion batteries for Electric Vehicles. In Quzhou, Zhejiang, a working symposium is held in the Yangtze River Delta region. The actual work will be carried out by the Shanghai, Jiangsu and Zhejiang branches of the MIIT.
June 27th - Merrill Lynch analysts released a report saying that, in the short term, lithium prices and various other factors surrounding the needs of electric vehicles are worth paying attention to. The report also points out that as the vast majority of lithium producers seek to boost production, the possibility of falling lithium prices is very high. Nickel, on the other hand, is a better investment target for watchers of the electric vehicle revolution. Worries about trade disputes have lowered the price of other industrial metals, but as stocks fell to four years lows, nickel prices has proven ability to resist the impact of trade disputes.
June 28th - BYD vice president and CEO of the Battery Business group, Ho Lung, revealed that BYD and China Metallurgical Corporation have established a joint venture company. China Metallurgical Corporation has a high-quality nickel-cobalt deposit in Papua New Guinea, which can be used by the joint venture company. He disclosed that the joint venture with China Metallurgical Corporation is for a small-scale participation in the control of cobalt resources for BYD. For China Metallurgical Corporation, they believe in the long-term sustainability of the battery manufacturing capabilities of BYD . The two sides have been negotiating for two years.
June 29th - Data shows that the number of battery component suppliers in China have dropped from 150 in 2015 to about 100 in 2017. According to Huang Shilin, VP of CATL, the electric vehicle battery industry has shown structural overcapacity for some time, and its expected that the overcapacity may continue up to 2020.
June 30th - The Freedonia Group released their latest global battery report. They expect the market value of the global battery market to exceed $54 billion by 2022, mainly due to the increasing demand for lithium-ion batteries and high prices for electric vehicles and EMUs, which is good news for many battery exporters on the Australian Stock Exchange (ASX).
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