Charge of the lithium brigade: Solid state batteries and metal demand

A recent Bloomberg article highlights the challenge facing the car industry if it is to deliver an electric vehicle that’s inexpensive, safe and capable of traveling 500 miles on a single charge. That quest has zeroed in on solid-state technology, an overhaul of a battery’s internal architecture to use solid materials instead of flammable liquids to enable charging and discharging.

If it can be mastered, the article suggests solid-state technology could help speed the demise of the combustion-engine car and potentially slash electric vehicle charging times to about 10 minutes from as much as several hours.

The challenges are enormous, but the opportunity is potentially enormous for investors betting on the right metal before the bullish narrative is born, and are swift enough to know when the narrative is getting tired.

But which metal? George Heppel from CRU had this to say on LinkedIn in response to the article (my highlight in bold):

The massive growth in interest in electric cars has prompted widespread speculation on what form the next-generation battery will take – but for now, conventional battery technologies are here to stay for the next 10 years at least. Nickel, cobalt and lithium will continue to be the key EV battery materials. Cobalt may continue to be thrifted out in exchange for higher nickel content, but it is unlikely that it will be removed entirely – and any thrifting will be more-than made up for by an increase in battery demand.

Looking further forward (10+ years), I broadly agree with the article that solid-state batteries are the most likely next major step in battery technology. This would result in a decrease in nickel and cobalt demand and a corresponding increase in lithium demand as graphite anodes are replaced with lithium metal. Interestingly, this additional lithium demand will most likely take the form of lithium metal as opposed to lithium carbonate or hydroxide. Major investments into lithium metal refining capacity will need to be made in order to meet demand.

As ever its important to know that any bet on a particular energy metal is a bet on innovation. Technological developments of all sorts involve a large dose of serendipity and its impossible to say for certain how innovation in batteries will evolve. The lesson from history is that metal price spikes (of all kinds but particularly minor metals like lithium and cobalt) tend to be spectacular, but ultimately brief.

Related article: Electric dreams: If you thought predicting oil prices was tricky, try cobalt or lithium

Related article: What lessons does rhodium have for commodity investors?

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