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Countries worldwide have announced policies to promote the shift toward green technologies—especially electric vehicles (EVs).
In 2022, the US passed the Inflation Reduction Act (IRA) to provide tax incentives and funding to create a clean energy economy. In Europe, the Green Deal Industrial Plan will require all new cars sold in the EU to be zero-emission starting in 2035. And importantly, The EU’s new series of proposed targets and reforms, contained in its Green Deal Industrial Plan, aims to ensure that at least 40% of the EU’s low-carbon technologies will be made within its borders by 2030. In India, the national Production Linked Incentive (PLI) is set to encourage domestic EV manufacturing—and this is just a glimpse of the latest policies worldwide.
As the groundwork for a new era of greener energy and electric vehicles is paved, concerns about whether there are enough raw materials to make these plans a reality have been raised. And these concerns are not unfounded. In this blog, we will look at which commodities go into electric car batteries, why they are in high demand, and the outlook for the future—particularly for lithium and nickel.
What are Electric Car Batteries Made Of?
Five fundamental commodities are used in almost every electric vehicle battery: lithium, nickel, cobalt, manganese, and graphite. Here is an overview of each:
What is Lithium?
Lithium—sometimes called “white gold” due to its color and high value— is an essential and reactive metal widely used in various high-tech industries. Its efficient energy storage and release capabilities make it invaluable in powering modern electronics, electric vehicles, and renewable energy systems, particularly in the form of lithium-ion batteries. It has been one of the key minerals in the transition to greener technologies like electric vehicles.
What is Nickel?
Nickel’s role has shifted significantly from being predominantly used in stainless steel to becoming a pivotal component in the green transition, primarily driven by its demand for batteries, particularly for electric vehicles. This transformation has triggered a substantial price surge, with nickel prices tripling since 2016, underscoring supply constraints amid the accelerating adoption of electric cars.
What is Cobalt?
Cobalt is a crucial element in the high-tech industry due to its unique properties and versatile applications. High-temperature alloys, created primarily using cobalt, are essential for advanced technologies like semiconductor fabrication, electric vehicle batteries, and aerospace products. The ability of cobalt-based alloys to maintain their structure at high temperatures is crucial for ensuring the efficiency and reliability of operations in these industries.
What is Manganese?
Manganese is a brittle, silvery metal mainly used in alloys, such as steel. Manganese steel contains about 13% manganese and is used in railway tracks, safes, rifle barrels, and prison bars. In batteries, manganese is used to improve performance, enhance safety by reducing overheating, and make batteries more cost-effective and sustainable.
What is Graphite?
Graphite is most known for its use in the humble pencil. However, graphite plays a much bigger role in lithium-ion batteries—representing nearly 50% of the materials needed for a battery by weight. Graphite makes up the anode responsible for storing and releasing electrons during the charging and discharging process.
Below, we dive deeper into two of these, Lithium and Nickel; specifically, top consumers and producers, challenges and opportunities, and the future outlook for these commodities.
Lithium and Lithium-Ion Batteries
Top Consumers and Producers of Lithium
The lithium market is undergoing a significant global shift, with the Asia-Pacific region leading the way in market share. China, Japan, and South Korea are among the top consumers, driven by their increasing demand for lithium-ion batteries in electric vehicles and other high-tech applications. To meet this demand and ensure a sustainable supply chain, Australia, Chile, China, and Brazil are proactively ramping up their lithium production. China has also invested in lithium production in other nations like Zimbabwe and Bolivia, underscoring the strategic significance of lithium in achieving low to zero-emission technology objectives.
Challenges and Opportunities
Recent developments in the lithium industry have presented a mix of challenges and opportunities. Namibia’s recent decision to halt lithium exports underscores the fierce competition for access to this valuable resource as countries strive to establish self-sufficient supply chains for their high-tech industries. In contrast, the United States has made a significant breakthrough with the discovery of a massive lithium deposit along the Nevada-Oregon border. Mining lithium is a challenging task, though. To produce one ton of lithium requires 2.2 million liters of water and can pollute the air and water with heavy metal, which can cause long-term ecological damage.
GM’s proactive move to invest $650 million in Lithium Americas Corp is worth highlighting, as it will greatly facilitate the development of the Thacker Pass lithium mining project in Nevada. This strategic investment by GM puts them ahead of China’s Ganfeng Lithium, making them the largest shareholder in Lithium Americas, and has the potential to produce enough battery metal to manufacture one million electric vehicles annually. This deposit could become one of the world’s largest, with far-reaching implications for the global shift to sustainable energy solutions and electric vehicles.
Projected Growth in the Lithium Market
Experts predict that the lithium market will continue to grow robustly at a compound annual growth rate (CAGR) of 12.3%, worth $7.49 billion in 2022. The decreasing cost of lithium, which dropped by 35% from $66,123 in June 2022 to $42,650 in June 2023, is worth noting, as it underscores the expanding global production capacity. This, in turn, highlights the pivotal role of lithium in the high-tech industry’s pursuit of sustainable and clean energy solutions. As the demand for lithium grows, experts anticipate that a worldwide lithium shortage could happen as soon as 2025 as supply struggles to keep up.
Nickel in Electric Car Batteries
Top Consumers and Producers of Nickel
Indonesia is the world’s foremost nickel producer, accounting for 37% of global production. This concentration of production in one country amplifies concerns about supply chain vulnerabilities and associated ESG risks linked to nickel mining. These challenges include pollution, violations of indigenous rights, greenhouse gas emissions, and subpar working conditions.
Indonesia predominantly exports its nickel to critical markets, including China, Germany, North Macedonia, and Australia, further highlighting its pivotal role in the global supply chain. However, it is crucial to recognize the ESG challenges inherent in the nickel industry and the necessity of sustainable practices and diversified supply sources to support the green transition effectively.
Challenges and Opportunities
To address supply concerns and expand the electric vehicle market, notable players like Ford have begun investing in Indonesia-based nickel facilities. For instance, Ford recently announced a significant investment in an Indonesian nickel factory set to open in 2026. This facility is expected to produce up to 120,000 tons of nickel annually, aligning with the surging demand for battery-grade nickel.
Projected Growth in the Nickel Market
The global nickel mining market size was estimated at $50.40 billion in 2022 and is estimated to grow at a compound annual growth rate (CAGR) of 6.6% from 2023 to 2030. By 2040, over 60% of demand for nickel is projected to come from batteries—up from less than 10% in 2020. As the demand for electric vehicles grows, so does the price of nickel, which has nearly tripled since 2016.
How Automotive Companies Can Prepare Their Supply Chain
As demand grows for commodities like lithium and nickel, automotive companies must stay ahead of competitors when purchasing these essential materials. Resilinc’s CommodityWatchAI is a predictive algorithm that combines machine learning and proprietary data to predict commodity price fluctuations and supply constraints more than three months out—so companies can see what’s in demand, source alternative materials, and restructure plans.
Companies should also keep up with the latest news surrounding electric car batteries and related commodities. Learn about the effects of recent export bans and disruptions to the EV industry, including global sources of crucial EV commodities and practical strategies to safeguard your supply chain with Resilinc’s Special Report, From Crisis to Catalyst: Tracking Commodity Hurdles in the Global EV Industry.
