Despite the challenges ahead, the medium- to long-term outlook for the Li-ion market remains positive, with considerable growth opportunities across the supply chain. Picture: Henk Kruger Independent Newspapers
The demand for lithium-ion batteries (Li-ion) is set to soar dramatically over the next decade, with projections indicating the market will exceed $400 billion by 2035, according to a recent report by IDTechEx.
At the heart of this explosive growth lies an ever-increasing utilisation of Li-ion batteries in consumer electronics, electric vehicles (EVs), and the widespread adoption of renewable energy sources reliant on efficient energy storage solutions.
Dr Alex Holland, the research director at IDTechEx, said this research looked at the falling battery costs and how this will affect the Li-ion battery market long term.
“The cost of raw materials such as lithium, nickel, cobalt, and graphite play a pivotal role in shaping the overall cost structure of lithium-ion batteries. As these materials are core components of a battery cell and battery production, their market dynamics directly affect battery pricing trends,” Holland said.
“During 2022, lithium saw unprecedented price spikes due to a strong increase in demand, while nickel and cobalt also faced supply chain pressures, contributing to rising costs. In 2022, the cost of lithium, nickel, and cobalt alone could have contributed up to $60/kWh to the cost of an NMC 811 battery. However, 2023 saw a decline in prices, with the cost of those same raw materials contributing only around $20/kWh during 2024.”
In November last year, the World Bank published the battery storage market and value chain assessment in South Africa synthesis report that analysed the local battery storage market. It said the sector could be expected to grow from 270MWh in 2020 to 9 700MWh in 2030 under the base-case scenario and 15 000MWh under the best-case scenario. In both cases, it said the electric vehicle (EV) sector was expected to drive the bulk of this growth.
The study noted that Li-ion battery (LIB) chemistries will continue to be the dominant battery technology by 2030, with Nickel Manganese Cobalt (NMC) expected to be the leading LIB chemistry, while vanadium redox flow batteries (VRFBs) were expected to gain a significant market share in the stationary energy storage space.
The World Bank said South Africa and even more so the Southern African sub-region was well-endowed with many of the battery minerals that were required for LIB manufacture.
Holland said supply and demand dynamics are critical to battery pricing.
“For example, LFP type Li-ion batteries are widely used due to their comparatively low cost compared to NMC-based battery chemistries but in 2022, LFP cathode prices increased faster than expected based on underlying lithium and material prices due to a surge in demand, especially in China,” he said.
“This, in turn, led to a fast rise in LFP cathode production capacity in China and overcapacity through 2023 and 2024. Subsequently, LFP cathode prices have fallen to as low as US$5/kg, squeezing margins for producers and highlighting the strong competition in LFP production in a trend seen more broadly across the industry.”
Despite the challenges ahead,Holland said the medium- to long-term outlook for the Li-ion market remains positive, with considerable growth opportunities across the supply chain. He said there continued to be broad policy support for both EVs and renewable energy deployment, both of which relied heavily on Li-ion battery technology.
According to this report, policy and regulation, including the US Inflation Reduction Act and emissions performance standards in Europe, will continue to create stable demand for EVs outside of China while increasing deployment of renewable power will continue to drive the adoption of energy and battery storage systems.
Holland said battery prices were increasingly driven by material prices and availability, though supply and demand dynamics remained critical to pricing.
He added that while low battery prices are beneficial to consumers, it can also curb new investment and creates a challenging environment for new entrants, an issue more keenly felt by European and North American battery industries.
“Nevertheless, the outlook for the global Li-ion battery market remains positive, driven by broad policy support for EVs and renewables and ongoing improvements to battery technology.”
BUSINESS REPORT