Asian battery makers eye nickel top-up as cobalt price bites

By Jane Chung and Joyce Lee SEOUL (Reuters) - Soaring cobalt prices are prompting Asia's top battery makers to tweak the recipe for lithium-ion batteries used to power electric cars and mobile phones - reducing the amount of cobalt and adding more nickel. With forecasts for electric vehicle (EV) battery demand to jump 20-fold over the decade to 2025, manufacturers are looking to cut back on more expensive components. Cobalt has more than doubled in price over the past year on strong demand and a supply shortage. Popular nickel, manganese and cobalt (NMC) lithium-ion batteries typically employ a ratio of 60 percent nickel to 20 percent cobalt and 20 percent manganese, or 6:2:2, said South Korea's SK Innovation, which aims to change the composition of these cathode materials to 80 percent nickel, 10 percent cobalt and 10 percent manganese. "We are trying to change the ratio to 8:1:1, from 6:2:2. This is not producing a completely new product, rather it's part of efforts to respond to changing market conditions," a spokesman said. Cobalt prices spiked to average $58,549 a tonne in July - about six times the cost of nickel. The price hike has been driven by higher demand and a supply shortage sparked by conflict in the Democratic Republic of Congo, which provides nearly 60 percent of the world's cobalt, also raising issues of security of supply. Surging demand for EV batteries could add some 10 percent to 40 percent to current nickel demand by 2025, depending on the success of efforts to replace cobalt with nickel, UBS said in a recent report. Asia dominates global EV battery shipments. Japan's Panasonic Corp accounted for nearly 30 percent of shipments in the first five months of this year, while South Korea's two top producers - Samsung SDI and LG Chem - made up more than 20 percent, according to SNE Research. China's BYD Co had just over 8 percent of the market. HALVING COBALT USE Samsung SDI said it expected the amount of cobalt per battery unit to decrease in the long term to about half of current levels across the industry. However, technological developments would take some years. In the meantime, battery makers would minimize the impact of the cobalt price increases by raising product prices or signing long-term contracts to ensure stable supply, Korean battery makers said. Panasonic, which employs nickel-cobalt-aluminium (NCA) technology for customers including Tesla, is making efforts to reduce cobalt consumption but declined to give figures on ratios. "We acknowledge the price rise but because (cobalt) is a rare material, we have been working hard to minimise the usage from the beginning of development," said a Panasonic spokesman. UBS said it believed that Tesla was using an 8:1:1 ratio and was working with Panasonic to develop a battery with about 85 percent nickel. LG Chem has put up the prices of its small-sized batteries due to increased cobalt costs and was talking with customers about linking metal costs and selling prices for car batteries, Kang Chang-beom, head of management strategy department at LG Chem, said last month. "We are doing R&D for a product with a reduced portion of cobalt and seeking various ways such as hedging metal price changes through long-term supply contracts," Kang told a conference call. China's EV battery producers such as BYD are focused on cheaper lithium-iron-phosphate (LFP) batteries that don't use either nickel or cobalt, said Suba Arunkumar, Research Manager, Energy & Environment, at consultancy Frost & Sullivan. However, the market is shifting towards NMC and NCA batteries which offer a better power-to-weight ratio, raising similar issues of improved technology to boost nickel usage, analysts said. "The option of recycling cobalt is also gaining importance," Arunkumar said, adding that nearly 15 percent of U.S. cobalt consumption already comes from scrap recycling. (Reporting By Jane Chung and Joyce Lee in Seoul; Additional reporting by Osamu Tsukimori in Tokyo and Tom Daly in Beijing; Editing by Richard Pullin)