Nickel, Cobalt, and other battery metals face supply crisis due to demand for electric vehicles

battery metals

As the growing demand for batteries that power electric vehicles continues to grow, the markets are anticipating a supply crunch in the commodities market never seen before in its history. Specifically, a new report has come out that suggests lithium, cobalt, and nickel will face a supply crunch by the mid-2020s that will shake the industry to its core.

According to research produced by global consultancy Wood Mackenzie, demand for electric vehicles is skyrocketing. Last year saw a 24 percent spike in sales for EV’s, with hybrid electric vehicles representing over 60 percent of total electric vehicles sales for the year.

By 2025, it’s expected that gas-free cars will account for 7 percent of all passenger car demand, with this figure doubling in 2030. Eventually, electric vehicle demand is expected to become 40 percent of all automobile demand by 2040. In turn, this will lead to a surge in battery demand, as well as the metals that are used in battery production.

“Battery pack sizes continue to trend larger through the medium term, resulting in overall greater battery demand. We have seen the first announcements of the commercialization of NMC 811 cells in EVs,” said Gavin Montgomery, WoodMac research director. “While still conservative on mass market uptake for [811 cells], we are more optimistic in regards to adoption. As such, we expect to see an increased nickel demand at the expense of cobalt, and to a lesser extent, lithium.”

Many car makers, such as BMW, Toyota, Ford, and Volkswagon, have all promised that the would transition away from gas-cars and become completely electric by 2050. At the current rate of demand, if battery technology is tested, improved, and implemented faster then ever before, it will be impossible for these major auto-manufacturers to make their promise a reality due to a lack of available materials.

Tesla (NASDAQ: TSLA) representatives have warned repeatedly that there could be a massive shortage of key battery metals in the future as not even money is being invested into new mines to keep up with the project demand. Electric vehicles also tend to require higher volumes of these metals than their gasoline counterparts, using twice as much copper, for example.

Some of these crucial metals, like cobalt, are produced predominantly in the war-torn Democratic Republic of Congo, where production is associated often with human rights abuses and is prone to disruptions due to political instability. Lithium, on the other hand, is mainly produced in Chile, Argentina, and Australia.

Even China, which currently dominates in other metal production as is the case with the global rare earth metals market, has tremendous quantities of Lithium that they are planning to develop. In all of these cases, the U.S. remains woefully behind in this regard, and industry experts argue that this needs to change in order to meet global demand.

Earlier this year, the World Bank forecasted that by 2050, demand for nickel, graphite, and lithium will jump by 108 percent, 383 percent, and 965 percent respectively. With such an increase seeming inevitable, investors in companies that produce these metals have a bright financial future on the horizon.