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Jon LeSage

Jon LeSage

Jon LeSage is a California-based journalist covering clean vehicles, alternative energy, and economic and regulatory trends shaping the automotive, transportation, and mobility sectors.

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Metal Prices Surge As EV Production Grows

The cost of lithium ion batteries will need to be cut down substantially for electric car purchases to become appealing to millions more car shoppers - but for now, the cost of the rare earth metals and other elements going into the batteries are keeping the market’s future less predictable.

Cobalt is one of the core chemical elements going into Li-ion batteries, and has become the source of growing concern over the impact on the workers mining it. The Republic of Congo has been seeing a boom in cobalt production, but these mines have been reported to be dangerous and are violating child labor laws.

Two-thirds of the world’s supply of cobalt used in EV batteries comes from the Congo, with its value tripling in the past 18 months to meet demand. The metal has been trading above $80,000 a metric ton, which has driven the country to add more mines and bring more workers into the mix.

Automakers like Tesla, General Motors, and Toyota, with their ambitious plans for growing their EV market share, are quite concerned about whether being dependent on the Congo will tarnish their images.

Amnesty International in 2016 put pressure on tech giants Apple Inc. and Microsoft Corp. for tapping into the African country’s cobalt supply. The human rights group had reported that children were being sent into mines to dig for cobalt. Another claim made in the report was that pit and tunnel collapses had killed dozens of workers in 2015.

The country’s overall cobalt production fell in 2016 after a crackdown following the Amnesty report, but it rebounded last year as demand from automakers and other industries has grown.

Related: Are All Car Makers Backing The EV Revolution?

Increasing costs for rare earth metals like neodymium have driven Toyota into finding alternative elements for meeting its ambitious EV targets. The Japanese carmaker plans to offer an electrified version of every vehicle in its lineup by 2025. The company wants half of its vehicle deliveries - or about 5.5 million per year - to be electrified vehicles by 2030, including one million being battery electric or hydrogen fuel cell vehicles.

During a press briefing in Tokyo on Tuesday, Toyota announced its developed a magnet for the electric motors that will cut in half the use of the neodymium rare earth metal and will eliminate the use of others called terbium and dysprosium. The Japanese carmaker is asking its suppliers to manufacture the magnets using rare earth metals lantern and cerium, which cost 20 times less than neodymium.

German automaker BMW has been securing long-term agreements to stabilize the cost of battery packs. The company plans to roll out 12 battery-powered models by 2025 and predicts it will make for a 10-fold increase in materials like cobalt and lithium during that timeframe.

To make its EV strategy profitable, BMW has been negotiating five- and 10-year purchasing agreements with battery suppliers to make sure there will be enough battery technology and the costs will be contained.

“We’ve been intensively focusing on how to manage future cobalt supply for about a year now,” said Markus Duesmann, a BMW purchasing executive. “Before, it wasn’t clear just how quickly demand will accelerate.”

Battery makers are thrilled to see demand for Li-ion batteries growing, even when it's taking much longer for EV sales to grow to levels predicted nearly a decade ago.

Other sectors are filling some of that void for now, especially energy storage batteries using these batteries. Growth in renewable energy coming from solar and wind are driving demand for energy storage, along with the need to stabilize electricity usage during events like natural disasters.

Related: Despair In Venezuela: “We Are Dying Of Hunger In The Oil Industry”

Cleantech consulting firm Navigant Research this week published a leaderboard on companies making strides in the energy storage market. Korean electronics giants LG Chem and Samsung SDI are now leading the market in this space. Tesla Energy was missing from the list, but its EV battery partner Panasonic made it to the “Contenders” rank, along with China’s largest EV maker, BYD.

The Navigant study reports that Li-ion batteries have been the “technology of choice for stationary storage projects in recent years.” The overall Li-ion market is expected to reach $23.1 billion in sales by 2026, with market demand being strongest in North America, Europe, and Asia Pacific. Demand is being driven by regulatory changes and incentives, with prices expected to come down enough to compete directly with retail electricity rates.

Engineering analysts predict that other battery technologies will come to market and beat Li-ion, but for now it is the technology of choice. A combination of low cost, energy density, efficiency, and safety have been behind energy storage suppliers tapping into Li-ion for now, according to the Navigant report.

By Jon LeSage for Oilprice.com

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