Electric vehicle (EV) sales surged some 160% 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.

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 carmakers 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 far more tepid growth of just 3.8% for new-auto sales overall.

But accelerating EV sales have created surging demand for key metals needed to make the batteries, such as nickel, cobalt and lithium.

The London Metal Exchange reports that the global nickel inventory has fallen 65% to 88,182 tons since April 2021, while the bagged briquette inventory has fallen 67% 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 – 11% of which was used to make EV batteries, up from just 7% the year prior. At over $24,000 a ton, nickel prices have climbed to their highest levels since 2011.

Double Whammy

In the meantime, cobalt supplies suffered the double whammy of coronavirus lockdowns in Africa – where much of it comes from, while surging EV sales pushed up demand.

Shipments from the Democratic Republic of Congo, for example, account for more than 70% of the global cobalt supply, according to Benchmark Minerals (BMI).

BMI expects the EV battery sector will account for some 104,000 tons of total global demand of 177,500 tons in 2022. At over $70,000 per ton, cobalt is at its highest price since 2018.

Lithium has also become far more expensive as supplies have been strained. BMI said lithium carbonate, which is used for lithium iron phosphate (LFP) batteries, has hit record highs over $50,000 a ton in China.

BMI estimates demand for lithium carbonate equivalent will hit 610,000 tons this year, up from 490,000 tons last year – and creating a potential supply shortfall of some 26,000 tons over available supply.

Source: Asia Financial, February 4, 2022