Green Energy

According to the report, global lithium-ion battery market was valued at around USD 31.17 billion in 2016 and is expected to generate revenue of USD 67.70 billion by end of 2022, growing at a CAGR of slightly above 13.70% between 2017 and 2022.

A lithium-ion battery is an electric device capable of charging and discharging. They are broadly used as a power supply consumer electronics as well as hybrid and electric vehicle. The four materials are used in lithium-ion batteries are cathode material, anode material, separators, and an electrolytic solution. Lithium-ion batteries markets grow at fastest rate due to its adoption in numerous consumer electronics such as smartphones, tablets, digital cameras and MP3 players, among others. Lithium-ion (Li-ion) batteries are one of the most popular batteries in the world due to the worldwide use of mobile phones and laptop computers. Furthermore, the demands for Li-ion batteries in the automobile industry due to increasing demand for electric vehicles.

A lithium-ion battery or Li-ion battery is a rechargeable battery wherein lithium ions move from the cathode to the anode during discharge and back when charging.  Li-ion batteries use an intercalated lithium compound as one electrode material, compared to the metallic lithium used in a non-rechargeable lithium battery. Lithium-ion batteries are mostly used for consumer or home electronics. They are one of the most popular types of rechargeable batteries for portable electronics, with a tiny memory effect, high energy density, and low self-discharge. LIBs are also growing in popularity for military, battery electric vehicle and aerospace applications.

The increase in demand for electric vehicle and smart devices and other consumer electronics are anticipated to boost the lithium-ion battery market over the forecast period. Strict Government regulations to control increasing pollution are likely to trigger the market for a lithium-ion battery. However, fluctuating price of lithium-ion batteries may hamper the market.  Nonetheless, increasing use of new technologies in lithium-ion batteries is likely to provide lucrative growth opportunities in the forecast period.

On the basis of type, the lithium-ion battery market segmented into lithium nickel manganese cobalt (LI-NMC), lithium iron phosphate (LFP), lithium cobalt oxide (LCO), lithium titanate oxide (LTO) lithium manganese oxide (LMO), and lithium & nickel cobalt aluminum oxide (NCA). Lithium nickel manganese cobalt (LI-NMC) is one of leading segment of lithium-ion battery. This type of batteries is used in application areas like e-bikes, power tools, medical equipment, and other electric powertrains. LFP battery is also called Lithium iron phosphate (LiFePO4) battery. Based on power capacity segment, lithium-ion battery market has been segmented into 5–25 Wh, 48-95 Wh, 18–28 KWh, 100–250 KWh and More than 300 KWh.  Low power lithium-ion battery (5-25 Wh) segment is one of the leading segments of lithium-ion battery market and accounted for over 32% of the total market in 2016. 18-28 KWh segment is another key outlet of the market and expected to exhibit significant growth within the forecast period.

Some of the key applications of the lithium-ion battery include automotive, aerospace and defense, consumer electronics, industrial and others. Consumer electronics application segment held the largest market share for the lithium-ion battery in 2016. This segment is expected to continue its dominance in the global market throughout the forecast period due to growing demand for low power capacity lithium-ion batteries to be used in smartphones and tablet. It is followed by automotive and industrial segments.

Geographically, Asia Pacific is expected to lead the market and emerge as a fastest growing region in the forecast period due to the rapid growth of the consumer electronics and automotive industry in China, Japan and India. North America is one of the largest markets for lithium-ion battery in 2016. Europe is expected to grow at a significant rate due to the surging demand for lithium-ion battery from the automotive industry.

 

Cobalt, one of the principal metals used to make electric car batteries, is in short supply and, as demand increases, so does the price.

A year and a half ago, the 2.1kg of cobalt needed for an average car battery was worth $600, now it is nearly $1700: a rise of nearly 300%.

Although the commodity has been found in the US and Australia, 60% of the world’s cobalt is found in one of the most chaotic and corrupt states on the planet: the Democratic Republic of the Congo (DRC). On Wednesday, the DRC’s Minister for Mines announced the export tax on the metal was to be doubled from 2% to 5%.

China has a near-monopoly on the Congo’s cobalt output. Although most of the metal is mined by subsistence-level miners -including children- China owns seven of the largest producers. Furthermore, most of the metal is purified in refineries based in China.

The fear is that if prices continue to rise so more cobalt will be stockpiled, exacerbating the problem further. China’s State Reserve Bureau has already built up a large reserve, so has the Swiss investment firm, Pala Investments.

Why This Matters

The rocketing price of cobalt has shed some doubt on the feasibility of replacing all the world’s cars with electric motors. However, back in the early 2000s, the price of palladium shot up as more car companies used it to filter out pollution from exhausts. As prices rose, companies figured out techniques to use less and so demand slid.

Similarly, the rising price of cobalt could incentivize companies to use less cobalt, or even find a cheaper, more plentiful, alternative.

Cobalt is benefiting heavily from the renewable energy revolution concerning green-energy devices, particularly used in electric cars. The metal is considered to be a technology enabling commodity. According to the London Mercantile Exchange (LME), trading volume reached 1600 lots in November, peaking in December 2016 with nearly 2800 lots being traded, compared to 500 lots being exchanged over the past ten months.

The price of the commodity has been skyrocketing since December 2016 and currently stands at around $44,250 per tonne, its highest level ever. Technical indicators MACD, RSI, and Stochastics all imply that the metal is strongly overbought and a potential correction of the rally to a more sustainable level might be possible in the near future.

 

The Major Producing Countries

Around 14 major producer countries supply the metal. Nearly half of the current global cobalt reserves can be found in the Democratic Republic of Congo. A potential benefit of Cuba opening up for trade will be the more accessible opportunity for commodity exports, due to the country’s 7% share of the metals reserve, placing the island at third place worldwide.

The only country actually able to produce primary cobalt is Morocco, holding a 0.3% share of the global cobalt reserves. Primary cobalt is very rare as around 47% of cobalt production is a by-product of copper and nickel ores and has to be extracted.

Tesla’s Dependency

Cobalt is a very versatile commodity in terms of usage – e.g. battery electrodes or catalysts for the petroleum and chemical industry. One particular use of it will be in the lithium-ion batteries of carmaker Tesla, as the batteries use more cobalt than lithium by weight. Tesla is substantially exposed to price movements in cobalt. Without an increase in copper and nickel demand, it will be very difficult to see the reasonable prices needed to produce Tesla’s batteries.

Taking into consideration the building of Tesla’s Gigafactory in Nevada, solely for the purpose of battery production at adequate prices, the scale of importance becomes visible. Tesla states on its website that it “will require today’s entire worldwide production of lithium-ion batteries”.

Tesla will inevitably become the largest consumer of cobalt from North America’s raw-material resources as the firm plans to start mining in the US in the near future. Hence, it is worth keeping an eye on American/Canadian mining companies and their stock prices.

Overall the battery industry accounts for over 41% of the global demand. Cobalt is a metal that cannot be replaced without losing product performance, making it a very attractive investment opportunity with plenty of upside potential.

Sourcing it from America and Canada as intended by Tesla will not fully work, as the cobalt output only equals 4% combined and will not even closely be enough for even one of Tesla’s models. Nevertheless, Tesla will try to source the current reserves from North America first as it has approximately one million tonnes of cobalt. Certain states in the US will potentially experience an increase in primary sector activity. Most of the reserves can be found in Minnesota, Idaho or Missouri.

Trading in Panasonic Shares experienced high volume spikes around the end of November, beginning of December 2016, potentially related to the announcement that Tesla is obliged to pay Panasonic $1.7bn for their electric vehicle battery cells made at Tesla’s Gigafactory. Tesla’s share price has been skyrocketing since the volume spike in Panasonic shares occurred, from $182.82 to currently $272.23.

The Biggest Cobalt Dealers

It is no surprise that trading house Glencore is always spot on regarding new upcoming success commodities and is already deeply involved with cobalt and one of the biggest market participants by far. After the much-talked-about deal with Rosneft and Qatar regarding oil, just two weeks ago Glencore agreed to a $960m deal meant to boost ownership of two giant Congolese cobalt and copper mines. This allows the commodity firm to profit more from the booming prices, holding now a 31% stake in the world’s largest cobalt mine – Mutanda Mining.

Glencore had a superb turnaround after its slump in equity price. By selling $10bn in assets and cutting debt, as well as rebounding commodity prices, it seems like 2017 will be the year of Glencore. Increasing world market prices for cobalt and copper will directly benefit the firm’s pockets and being the biggest player in most of the world’s commodity trading certainly helps.

The following chart shows the correlation coefficient of Glencore being at the moment at 0.5434 compared to the overall market movement of the benchmark index FTSE 100. The slump in equity price and the following rebound of the stock can be clearly identified in the chart, correlating to the upward moving FTSE 100 index over that time period.

Cobalt Is a Complicated Business

Tesla’s plan, as previously mentioned, is to source cobalt locally, from North America, and to potentially, simultaneously increase its ESG (Environmental, Social, Governance) efforts. The current major supplier of the metal for Tesla is Japanese firm Sumitomo Metal Mining (SMM), having its cobalt mine in the Philippines. Sumitomo is dealing via Panasonic, which in turn is Tesla’s main provider and longstanding partner. Tesla does not disclose supplier information due to the delicate nature of cobalt production in terms of workers and environmental protection.

Congo is a conflict region and the best-known effort to regulate mining is the US law regarding so-called “conflict minerals”. These include gold, tantalum, tin and tungsten. The Dodd-Frank Consumer Protection Act aims to trace flows of money from those materials to Congo’s militias and companies incorporated in the US attempt to trace those sources. Nevertheless, disputed raw materials can find their way into the supply chains of many of the MNEs, like Panasonic supplying Tesla. Therefore it is important to have adequate supply chain controls in place for companies to fulfil their CSR responsibilities.

Cobalt is a key material for cathodes but can come from mines in conflict regions and is limited in supply, making it a bottleneck for volume battery production. HVS is made from lithium, manganese and nickel, without the high cost and supply chain risk of cobalt. It is suited to fast charging and high power applications and is a candidate for next generation solid state lithium ion batteries for automotive, consumer electronics and energy storage applications.

“We have met our objectives and made a number of significant breakthroughs” said Dr Elahe Talaie, Senior Scientist and HVS team lead with Nano One. “Battery performance is excellent when our HVS is tested with lithium, graphite and lithium titanium oxide anodes (LTO). Our innovative process can control particle size and output voltage; and it stabilizes HVS for high temperature applications. All of these advances are critical to battery manufacturers. The project has led to two patent applications and HVS production is now ready for demonstration at pilot scale.”

Nano One can make HVS and other high performance cathodes using lithium carbonate or hydroxide, giving its process an advantage over manufacturing methods constrained to costly lithium hydroxide. Nano One can control HVS particle size to tailor it for energy storage or power applications and its higher voltage enables simpler energy management systems and delivers increased power at high rates of discharge.

“Higher volume samples are being made in our pilot and we look forward to beginning HVS evaluations with commercial interests in 2018,” said Dr Stephen Campbell, Principal Scientist at Nano One.

The Democratic Republic of Congo, supplier of two-thirds of the world’s cobalt, aims to more than double royalty charges. That’s bad news for electric cars: the metal is a key battery ingredient. But the move could backfire in the long-term by accelerating an already frantic search for alternatives.

Cobalt has been at the heart of the green fever in metals markets over the last year. Like lithium, nickel and even copper, its outlook has been transformed by ambitious forecasts for the growth of electric vehicles. The price of what was once an ingredient for aerospace superalloys has gone from under $35,000 per tonne a year ago to over $75,000.

The problem is there is simply not enough of it. Glencore , a leading producer of the metal, said last month that to meet the needs of the electric fleet expected to be on the road by 2030, demand for cobalt will be more than three times the amount supplied in 2016. The issue is that supply cannot be cranked up fast enough. Cobalt is a by-product of digging up nickel and copper, and virtually never mined for its own sake. It is also unevenly distributed – hence Congo’s dominant role. Big miners cannot easily go elsewhere to crank up production, nor can they simply snap up smaller players or speed up projects.

Given this, it would seem logical for Congo, which dominates both current and future supply, to exploit its current advantage to the hilt. In the near term, miners and carmakers will have little choice but to pay up. Volkswagen, for one, failed in its push to lock in supply.

But though tempting in a country that has squeezed miners before, this hike ignores one thing: the market is already seeking to reduce its dependence. Cobalt was a potential bottleneck for green technology even before Kinshasa’s latest gambit. A sharp tax increase will accelerate moves to work around it.

It also aggravates miners’ and investors’ anxiety about working in the DRC, one of the world’s poorest countries, where questionable practices in smaller mines already create headaches.

It will be hard to replace cobalt in the short-term – the current battery chemistry of choice requires it. But there could, for example, be a push to stick for longer with existing alternatives in price-conscious markets like China: lithium-iron phosphate, for example. Substitution is inevitable.

Following through on its recent commitments to combat climate change, China is now on track to become the global leader in the development, financing, and exportation of clean energy technology.

According to a new report from the Institute of Energy Economics and Financial Analysis (IEEFA), China has made further progress since 2016 due to continued investment in improving the infrastructure needed to transport locally produced energy and equipment. The nation’s Belt and Road Initiative (BRI) commenced in 2013 to create travel routes and power grid connections within China and to other areas of the continent, often following ancient trade paths such as the silk road. In 2017, funds allocated to the BRI surpassed $31 billion.

In addition, Chinese power companies have expanded their presence overseas. A Chinese wind power developer is now the largest in the world, and several hydroelectric power companies have acquired contracts for large-scale utility projects in Latin America, Africa, and Asia. The IEEFA calculates that over $44 billion was spent on international wind, solar, and hydroelectric farms in 2017.

Unlike the current US government, which has lifted environmental moratoriums on coal mining, China has been shifting away from the fossil fuel. In August, the country’s largest coal mining company merged with one of the major power utility companies. The resulting group, China Energy Investment Corp, is now the largest power supplier in the world and no longer needs to pit coal against clean power sources to generate revenue.

China also continues to lead on solar cell and battery manufacturing. Chinese companies produced 60 percent of the solar cells sold in 2017, and emerging technology is slated to produce a battery with a superior capacity to those made by Tesla (121 gigawatt-hours of storage vs 35) by 2020. One reason for the dominance in battery research is that China obtains 62 percent of the world’s cobalt through state-run mining operations across the world. (The environmental impact of rare mineral mining, however, is a whole separate can of worms.)

“The clean energy market is growing at a rapid pace and China is setting itself up as a global technology leader while the US government looks the other way,” said report co-author Tim Buckley in a statement. “Although China isn’t necessarily intending to fill the climate leadership void left by the US withdrawal from Paris, it will certainly be very comfortable providing technology leadership and financial capacity so as to dominate fast-growing sectors such as solar energy, electric vehicles, and batteries.”