By Kwasi Ampofo and James Frith, BloombergNEF
EV battery industry leaders including Tesla Inc., LG Chem Ltd., and BMW AG are shifting to high-nickel cathodes in order to increase battery density. As a result, BloombergNEF forecasts battery demand for nickel may increase ninefold by 2030.
Increasingly, the nickel needed to drive EV batteries will come from Indonesia, particularly through the application of high-pressure acid leaching (HPAL) technology, meant to produce battery-grade nickel sulfates from lower-grade laterite ores. Among the eight HPAL projects in operation around the world, half of the best performing Tier 1 and Tier 2 assets, are in Indonesia. Producers are developing six new HPAL projects that collectively can produce 220,000 metric tons of battery-grade refined nickel, and 70 percent of this capacity is being developed in Indonesia.
Upcoming battery-grade refined nickel capacity development
Chinese battery manufacturer Contemporary Amperex Technology Co. has been negotiating with Tesla Inc. to supply batteries for the automaker’s Chinese gigafactory. This has fueled debate over whether Tesla will switch to using lithium nickel-manganese-cobalt oxide, or so-called NMC, batteries instead of the lithium-nickel-cobalt-aluminum oxide, or NCA, cells for which it is known. A switch would have implications for metals demand.
The primary reason for this speculation is that CATL already produces NMC cells and does not produce NCA cells. Elon Musk confirmed that Tesla would have multiple cell suppliers for its Shanghai plant on the company’s first-quarter earnings call. Such a shift, however, is not a given, according to BloombergNEF’s analysis.
It is true that CATL already produces batteries of different chemistry types. It uses lithium-iron phosphate, or LFP, batteries for stationary storage and electric buses, but NMC for passenger EVs. Adding a new line to produce NCA for Tesla’s EVs would be relatively simple.
In addition, CATL has recently started producing NMC (811) cells, with eight parts nickel for every one part manganese and one part cobalt. These are as technically challenging to produce as NCA cells. This is because both cathode active materials are sensitive to moisture.
CATL therefore already has the required knowledge and technology to manufacture NCA cells.
Tesla also uses a form of NCA with a lower-than-normal cobalt content – five percent versus 14 percent, which BNEF refers to as NCA+. This is much lower than what its peers have been able to achieve and is the result of more than seven years of research and development. BNEF estimates that its cells also contain 50 percent less cobalt than NMC (811) cells. This reduces Tesla’s exposure to cobalt price volatility and it is unlikely that Tesla would be eager to abandon what is currently an important differentiator for the company.
A lower dependence on metal sourced from the Democratic Republic of Congo would also be beneficial from the perspective of sustainability. A heavy reliance on the D.R.C. continues to trouble automakers. German automaker Bayerische Motoren Werke AG, for example, has said it will source its cobalt from Australia and Morocco. If all automakers were to follow this path, especially if Tesla switched to NMC, the market would soon run out of non-D.R.C. supply. Indeed, Tesla recently provided evidence of a credible route to going cobalt free in NCA, a goal Elon Musk has explicitly stated. This is something that hasn’t been achieved in the NMC family of cathodes.
As things stand, Tesla produces performance vehicles – even its cheapest EV, the standard range Model 3, can do 0-60 miles per hour in 5.6 seconds. NCA is better at providing high power, needed for this high performance, than NMC. If it were to make the switch it could sacrifice this performance.
And there is more to the supply chain. Panasonic doesn’t manufacture the NCA active material, this comes from a third-party material producer like BASF SE or Umicore SA. It is the relationship with the material producer that will truly determine what chemistry Tesla uses.
