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Hi RL

I've listened to Ken Hoffman before but I haven't seen that video so thanks for posting. If anything he highlights just how nuanced the market is for both batteries and nickel. A couple of key points for me:-

Nickel needs to be $20,000/tonne + to incentivise new exploration/mines but remain below $25,000 to $30,000 to prevent nickel being thrifted out of batteries or replaced altogether. A low price is just as much of a problem as one that's too high but I think we know that.

Tesla and VW want nickel poweder not MHP which is interesting for both Horizonte (Vermelho) and Amur.

LFP will remain niche or at best a relatively small part of the battery market.

I didn't quite get the comment about nickel increasing by $20,000/tonne adding 20% to the cost of a battery. A $45,000 Tesla Model 3 battery costs about one third to half of the cost of the car, $15,000 to $22,500. It contains about 50kg of nickel. If nickel goes up by $20,000/tonne it adds $1,000 to the cost of the battery not $3,000 to $4,500. Maybe I misunderstood something but that's how I viewed that comment.

The slides in the presentation were interesting, in particular the one showing over supply of class 2 and a class 1 shortage by 2023. It wasn't clear to me what the slide was saying but I took it to mean that there needed to be a swapping of the class 1 still used to make stainless for class 2 to free up class 1 for batteries.

His comment "every producing nickel mine in the world has a different flow sheet" was a real eye opener. I didn't know that. I presume that goes for laterites as well as sulphides.

I thought Hoffman more bullish than Lowry but I suppose that's down to the different sectors they're in.

You might be interested in the adoption rates for EVs since 2014. The pandemic has messed things up a bit these past couple of year but everything seems to be getting back on track. By the end of this year I expect to see a 6.5m to 7.0m total for 2021. That would amount to 115% to 125% increase in uptake over last year. Last year was negatively impacted by covid but then again EV uptake is really only just starting.

https://www.dropbox.com/s/frbyanjmugxvz6i/EV%20Adoption%20Rates.pdf?dl=0

Ark Invest correctly predicted Tesla's rise to prominance several years ago. They are now predicting a CAGR of 80% for EV uptake. A few years ago I tried to do a "hockey-stick" graph of what that might look like. It's a bit dated now but you get the idea.

https://www.dropbox.com/s/0d6hlm0te705mom/EV%20Adoption%20Rates%20-%20Hockey%20Stick.pdf?dl=0

It's fickle nickel so its anybody's guess as to where this all might go but at the moment its looking positive.

TDT

Hi Minecheck

Thanks for your comments and observations.

“There’s a fair amount of group think about EVs these days.”

I think horse breeders thought something similar back in the 1900’s on the emergence of these new-fangled horseless carriages that started to appear.

I’m not sure I agree with your “……battery power for vehicles has been researched intensively for at least the last 20 years” comment either. Battery powered vehicles have been around for quite some time but the incentive to optimise performance hasn’t. 20 or so years ago battery powered cars were as much of a novelty as they were an experiment for some OEMs. Virtually none of the OEMs took R&D and an immanent move away from ICE seriously until fairly recently, in fact something like the past 3 to 4 years. Go back to 2014 and out of an annual worldwide market of 75m cars only 320,000 were either BEV and PHEV. Most of the BEVs were either Teslas, Nissan Leafs or Chevie V/Bolts.

Lithium-ion battery performance has experienced an incremental increase in performance of approximately 8% YoY over the last several years. Battery capacities, on average, range from 200 miles to 375 miles depending on the car and the battery chemistry. If that 8% YoY improvement continues, and there’s no reason why it shouldn’t, lithium-ion batteries would have 300 to 550 miles range. That's before you consider other types of battery.

A point to keep in mind, in the whole field of commercial high-tech developments, the most valuable and ground-breaking research is almost always kept quiet. An article I read recently on developments in the battery space had this to say:-

“And the possibilities for success have never looked brighter. Better Algorithms, backed by 10 times the computational power as of a few years ago search through millions of chemical possibilities, while better measurement techniques like Neutron scattering and more powerful X-ray crystallography are making it possible for the first time to study the nano-processes underlying the many failure modes batteries go through.”

Cycling through the options, identifying potential and commercialising the optimum chemistries has never been quicker and easier.

If we are at the peak of some sort of group think then I suspect that’s more likely to be from those still in denial about the emergence of EVs as the dominant form of transport.

TDT

Hi RL

The prediction in my post assumes the supply of critical metals will not be constrained. I don’t keep tabs on the lithium market to any great extent which begs the question, I suppose, how can you predict growth in the uptake of EVs if the supply of a critical commodity is going to be constrained. Joe Lowry is convinced that there is going to be a problem on the supply side, in particular lithium supply, but that’s not because there’s a shortage of lithium. On the contrary, there is plenty of lithium, Lowry confirms that. Its ramping up exploration and production to meet expected demand that’s the issue.

I found his comment about under investment in the lithium space in years gone by a bit shallow. You don’t invest in exploration when the price is in the toilet. Likewise a rapid and unexpected increase in demand (lithium, nickel, cobalt, take your pick) resulting in an increase in price will result in a significant increase in exploration. As for the time it takes to bring new discoveries into production price has a way of shortening that time frame.

A Tesla model S has roughly 10 kg of lithium in the battery pack (about 65kg of nickel). You don’t need me to tell you this but the value of the lithium, and nickel for that matter, in a $25,000 Tesla Model S battery pack is relatively small. Lithium or nickel doubling in price will have only a minor impact on the cost of the battery pack and an even smaller impact on the overall cost of the car. The push to bring down prices will come more from scale and manufacturing innovation than commodity prices. The impact on exploration and on timescales getting discoveries into production of a doubling in the price of lithium or nickel is an entirely different matter.

As an aside I’d expect the BDI to have just as big an impact on price than movements in the price of lithium or nickel.

https://www.dropbox.com/s/0u0gzs0jrcnan4x/BDI.png?dl=0

There is no physical law which states that power, charge times or cost can’t be improved significantly in a battery. A battery is a chemical composition after all and there are literally trillions of possibilities in the chemical world yet to be tried. The cure for high prices is high prices as you know. Whether that results in developments with sodium-ion batteries, magnesium-ion batteries, solid state batteries, iron sulphide or simply encourages more lithium into the market remains to be seen. Lowry’s prediction of a lithium supply crunch will simply result in either an accelerated push to bring more lithium into the market or the market looking to diversify into other battery technologies (CATL and sodium-ion being a good case in point).

In short plenty of views but no resources to hand I’m afraid. I’m expecting the market to work the way the market is meant to work, it will either increase supply in response to increased demand or innovate out the supply constraints.

In many ways the battery market is still a nascent one.

TDT

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