Supply chain disruptions and soaring demand has sparked significant volatility in metals markets.
Battery original equipment manufacturers have enjoyed a clear trend for much of the last decade. In fact, they’ve largely achieved falling per kWh manufacturing costs thanks to two strong dynamics. The first is economies of scale. After all, demand for both consumer electronics and electric vehicles in all forms – hybrid and full EV – continues to rise. The second dynamic is the technological advancements reducing the use of high-cost component metals like battery nickel and cobalt.
The second dynamic follows a similar path. EV uptake this decade has been impressive, particularly in the western US states, Europe, and China. However, many automakers find themselves becoming victims of their own success. In many cases, they continue to scramble to build supply chains to keep up with demand.
Traditionally, battery makers enjoyed long-term off-take agreements with miners and refiners. This fixed raw material costs and ensured demand to support the financing of new resource projects. Banks and other financial institutions were willing to lend to a project with a ten-year off-take agreement, as the business plan was comparatively more robust.However, the industry’s success has attracted myriad more financial options.
Yet another trend is the overall movement away from using refined metal in the supply chain and instead developing alternative intermediaries. For example, nickel briquettes once made up some 80+% of nickel sulfate producers. This is a key battery substrate for fast-charging, long-distance EV batteries. At the turn of the decade, these were rapidly replaced by mixed hydroxide precipitate , nickel matte, and mixed sulfide precipitate . All of these contain nickel in much lower percentages.
Of course, such a trend further distances battery input cost from the LME Nickel or, likewise, the LME Cobalt price. To make matters worse, it makes price discovery increasingly challenging for most of the industry’s major players.
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