Global sales are projected to hit 54 million by 2040 or 58% of new car sales (Figure 1) and is projected to account for 8.3% of Global EV Fleet by 2030 (Figure 2). As EV use becomes more widespread, automakers will be offering more EV models for consumers to select from and more importantly, better price competitiveness versus internal combustible engine (ICE) vehicles (Figure 3).

Figure 3. Major global automakers’ EV plans

Source: IndoPremier Research

Nickel in batteries

As the shift towards non-combustible engine gains traction, so will demand for raw materials including those used in EV batteries. Nickel for instance is expected to see projected annual demand rev up by at least 35% between now and 2030, according to an International Energy Agency (IEA) estimate (Figure 4). Nickel provides high-energy density and storage at lower costs (compared to cobalt) as well as longer driving range (Figure 5) and is often used in what is known as NMC (nickel, manganese, cobalt) batteries versus LFP (lithium, iron, phosphate) batteries.

Figure 4. Nickel demand by segments (kilo tonnes)

Source: IEA

LFP vs NMC batteries

The rising demand for nickel for EV batteries has seen nickel prices shot up by 20.1% between August 2020 and February 2021, partly due to the scarcity of nickel. That presents a shortcoming despite the downward trend of battery costs as that means the NMC battery accounts for 35-40% of the costs of an EV which is at a competitive cost disadvantage compared to EVs that uses LFP batteries.

LFP batteries while not as efficient and energy dense as nickel-based batteries have the advantage in that there is plentiful supply of iron and lithium and hence more scalable at a more competitive price at about 43% less than NMC batteries. That’s one of the reasons why the leading US EV manufacturer, Tesla has opted for LFP batteries for its Model 3 cars in China, partly also to tap government subsidies. Initially priced at 300,000 yuan, that has since dropped by 20-25% to about 249,900 Yuan or about US$36,800.

LFP does have its downsides in terms of performance and durability. With an energy density at 65-70% compared to that of NMC batteries, the battery would need to be 33% bigger to achieve the same driving range. That would affect a vehicle’s balance and explains why LFP batteries are employed for standard base models. Second, the charging capabilities of a LFP battery is limited as they cannot be charged to 100% in cold weather. The attractive price proposition however means that EVs with LFP batteries may find more traction in more moderate climates such as Southeast Asia.

Overall, both battery technologies are equally valid for different conditions – NMC for higher-end products; and LFP for basic models offered at a lower-price though both NMC and LFP technology will only get better and cheaper in the long-term, which offers more attractive price points for consumers.

With increasing EV fleets on the roads, that will also drive both public and private sectors to raise investment in EV infrastructures such as charging stations. Such developments can only be beneficial for sustainability as transport make up 16% of global emissions especially when personal transportation is an area that individuals can have a direct choice and impact.

Nickel long-term fundamentals still intact

Given the highest energy density and hence longer driving range, nickel is expected to play a big role in the development of EVs especially if it can lead to lower overall infrastructure costs by way of charging stations. Global supply and demand is still pointing to a nickel supply deficit and the medium-term outlook should still point to a brighter outlook.

Figure 9: Global Nickel Supply Demand

Source: Bloomberg NEF

It should also be noted that nickel as a commodity is not limited to NMC batteries. That is because the cathodes deployed in lithium-ion EV batteries typically have a composition of 85% nickel, 10% cobalt and 5% aluminum. Consequently, demand for nickel can only rise along with the burgeoning use of EVs. Complicating the supply-demand equation is the fact that not all nickel mined are suitable for use in batteries with the bulk being channeled to stainless steel production. Nickel sulfate is the key nickel-bearing product used by battery manufacturers but that is currently only commercially viable through extraction processes for about half of the nickel mined today.

By Adi Prabowo, Equity Research Analyst, PT UOB Asset Management Indonesia