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Which critical minerals will power NextGen electric batteries


  • value of global battery chain forecast to increase x10 between 2020-2030, worth US$410billion
  • lithium-ion, nickel manganese cobalt oxide (NMC) share fell form nearly 90% in 2019 to 60% in 2022
  • Sodium-ion, solid state, manganesium-ion, and other chemistries are being developed

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Demand for electric batteries is expected to grow 30% a year by 2030, with the value of the global battery chain forecast to increase x10 between 2020-2030 and be worth US$410billion.

This huge demand is being driven by electric vehicle (EV) sales which saw “exponential” sales exceed 10 million in 2022.

batteries Global electric car stock in selected regions 2010 2022 - The Oregon Group - Investment Insights

For investors and companies involved in critical minerals, the impact of this growth will be dependent on which battery chemistry is used.

The investor who can position their portfolio correctly ahead of the market stands to gain substantially.

The challenge: the technology is moving faster than ever as governments, companies and researchers race to optimize electric batteries for the future.

The drivers behind electric battery chemistry

Firstly, it’s important to take stock of the major factors behind what technology is used in electric batteries — even if a new, break-through technology promises more miles and faster charging, it won’t matter if the chemistry is too expensive to commercialize.

Factors includes:

  • energy density; size; safety; temperature resistance; charging efficiency
  • critical mineral availability and security of supply chains
  • critical mineral short and medium-term costs
  • government regulation, subsidies and tax credits that may favour specific minerals
  • use-type for the electric battery; for example, city cars have different needs (eg weight, distance, cost, etc) from long-haul trucks or battery storage packs)
  • time frame for new chemistry to be made commercially-viable

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Comparison of the main performance metrics of popular Li ion cathode chemistries - The Oregon Group - Investment Insights

Current state of the electric battery market

In 2022, the global electric battery market was dominated by lithium-ion batteries, made up of:

  • 60%, nickel manganese cobalt oxide (NMC) 
  • 30%,  lithium iron phosphate (LFP)
  • 8%, nickel cobalt aluminium oxide (NCA)

The minerals needed to manufacture each type include:

NMCLFPNCA
LithiumLithiumLithium
NickelIronNickel
ManganesePhosphateCobalt
Cobalt

Some of the major pros and cons include:

ProsCons
NMChigh energy density (more driving range); approx 1,000 discharge cycles; fast charging in cold environmentslow resistance in high temperatures
LFPno cobalt or nickel; approx 2,500 discharge cycles; safe; high temperature resistancelow energy density; low resistance in low temperatures;
NCAhigh energy density (more driving range); approx 1,000 discharge cycles; doesn’t use manganese;vulnerable to thermal runaway

But, over the last 10 years, the share of LFP batteries has increased significantly.

This growth has mostly happened in China, where original equipment manufacturers (OEMs) have shifted to LFP technology (around 95% of the LFP batteries for electric LDVs went into vehicles produced in China).

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This change has been driven by raw material availability and costs which spiked in the last few years, especially nickel and cobalt, just as government tax credits ended, environmental and social concerns over the source of such metals, as well as expiring patents.

Western companies are also now beginning to make the switch, including Tesla, who have announced that more than 50% of their new vehicles now use LFP; Ford’s announcement that its new plant in Michigan will produce only LFP batteries; and, in South Korea, the three largest electric battery makers — LG Energy Solution, Samsung SDI, and SK On — are reportedly “leaning into so-called lithium-iron-phosphate (LFP) battery technology as fast as they can.”

Electric light duty vehicle battery capacity by chemistry 2018 2022 - The Oregon Group - Investment Insights

However, as the price of cobalt and nickel drops, so too the transition to the LFP will likely slow.

In NCM batteries, this could also mean the tendency towards NCM 811 will slow and NCM 622, with its easier chemistry and option to use lithium carbonate instead of lithium hydroxide, may also remain in the market for longer than expected.

NCM 523NCM 622NCM 811
contains approx 20% cobaltcontains approx 20% cobaltcontains approx 10% cobalt
Lithium carbonateLithium carbonateLithium hydroxide

New electric battery chemistries

There are a number of new battery chemistries that are being developed that could have the potential to replace the current market leaders.

We are in not making any forecasts on which, if any, technology is best or will become more prevalent in the market place — electric battery research is some of the most exciting and new breakthroughs are happening very regularly.

Instead, we are highlighting some of the current, leading trends to provide context for the marketplace.

Solid-state batteries, use ceramics or other solid materials to move the charge (not a liquid electrolyte used in lithium-ion batteries). Potentially, the benefits include:

  • approx 5,000 discharge cycles, shorter charging times
  • safer than lithium-ion batteries
  • less dependent on supply and cost of lithium
  • maintain high conductivity at sub-zero temperatures

Solid-state batteries are still in the early stages of development and not yet commercially available. However, South Korea has announced US$15billion investment by 2030 to have the world’s first solid-state batteries, and OEMs, including Ford, Honda, Hyundai, etc, are researching their viability.

Sodium-ion electric batteries use sodium and aluminium, instead of lithium:

  • sodium is much more abundant than lithium, so cheaper
  • approx 1,000 discharge cycles
  • higher operating temperature range than lithium
  • faster charging times

The challenge is that sodium ion electric batteries have a lower energy density, and research to extend the life of the battery is still in its early stages. BloombergNEF expects sodium to take market share from the cheapest, low-range EV market, and car-maker CATL reportedly aims to mass produce them in 2023.

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Sodium Batteries Could Put a Dent in Lithium Demand - The Oregon Group - Investment Insights
  • magnesium-ion batteries are a type of battery that uses magnesium as the positive electrode instead of lithium. This makes them even less expensive to produce than sodium-ion batteries. However, magnesium-ion batteries have a lower energy density than sodium-ion batteries, and they are also more difficult to manufacture
  • much of this research is dedicated to the making the cathodes in lithium ion batteries more efficient, but the typical graphite carbon electrode with a metallic backing for the anode is also being researched — with the possibility of alternatives such as silicon helping to increase energy density and speed up charging

This list is in no way exhaustive, with a new type of lithium-iron-manganese-phosphate (LMFP) battery that promises to power an EV for 1,000km on each charge, with an energy density of 240Wh/kg, taking only 15 minutes to charge; a “blending technology” using NCM and LMFP to create a new battery called M3P; iron-air batteries, about the size of a washing machine, promise to improve energy storage systems; and many others.

And, of course, more intelligent battery management systems (BMS) will also play a significant role in improving battery performance.

How to invest in the electric battery market

For investors interested in the electric battery market there are a variety of ways to gain exposure:

  • invest directly in companies researching and developing new battery technologies
  • invest directly in the EV auto-manufacturers
  • invest in companies involved in the mining and production of electric battery raw and refined materials, such as lithium, cobalt and nickel 
  • investors can also invest in exchange-traded funds (ETFs) that track the performance of the electric battery market

The Worlds Top 10 Battery Manufacturers - The Oregon Group - Investment Insights

Conclusion

The electric battery market is growing rapidly, driven by government incentives and commercial demand. The market is still in its early stages, so there is significant potential for innovation. This means there is risk, but also the potential for high rewards.

The timeframes for investment are medium to long-term, as the supply chain for research, mining, refining, and manufacturing takes years to build out. Once a battery type has been adopted, it can take years to replace.

Investors should pay attention not only to new technology, but also to the practical and financial application of the tech. There are many different electric battery types with a variety of different use cases.

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about the author

Anthony Milewski

Anthony Milewski

Anthony Milewski has spent his entire career in the capital markets, including as company CEO, board director, advisor, founder and investor, with a focus on the energy transition and commodities.

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