The electric vehicle (EV) market is set to become the main driver of surging battery storage deployment over the next decade, following increasing ambitions by developed and emerging markets to decarbonise their transport sectors, and will have a substantial disruptive effect on how energy is generated and consumed, while becoming a vast source of demand for metals.

This is according to analysis by consultancy company Fitch Solutions, which, in early December, held a webinar focused on the impact of EVs across sectors.

As a result of policy and government support, China will remain the biggest market in the world over the next decade, says Fitch Solutions’ Anne-Marie Raisden.

China is forecast to record a yearly growth rate of 19% over this period, with growth slowing towards the latter part of the decade.

While Chinese policies are promoting the use of manganese, nickel and cobalt for EV batteries, Raisden highlights the US’s use of the Tesla brand, which uses cobalt and aluminium.

Compared with Europe, which has a much more varied battery chemistry type, Raisden says, there are several areas of demand over the course of the next ten years.

Fitch Solutions mining and metals analyst Diego Oliva-Velez explained during the webinar that the main chemistry types being used by EV manufacturers in batteries comprised nickel, manganese and cobalt; nickel, cobalt and aluminium (NMC); and lithium, iron and phosphate (LFP).

Of these, Oliva-Velez believes NMC will be the most widely adopted, owing to the its low self-feeding rate, which improves the reliability of a battery, while maintaining a good energy density.

Based on a forecast comprising data from 53 countries, he highlighted that NMC cathodes currently accounted for about 28% of global EV sales, with the figure expected to grow to 53% by 2027.

However, one key downside was that the NMC chemistry had a relatively high cobalt content, which, Oliva-Velez said, exposed manufacturers to significant price risks and challenges relating to sustainable sourcing.

Battery manufacturers were working towards reducing this challenge, he stated.

LFP would also retain a significant presence, owing to its use by Chinese manufacturers and its lower cost, long cycle life and thermal stability.

“Considering that we’re forecasting Chinese EV sales to [represent] the second-highest annual growth rate globally over the next ten years, buoyed by strong government support, global LFP sales will continue to account for a significant portion of total cathode sales to 2027,” Oliva-Velez stated.

Nevertheless, sales of NMC batteries would eventually overtake sales of LFP batteries in China.

Considering Fitch Solutions’ view that nickel-heavy NMC batteries would dominate the EV market over the coming years, the company forecast that nickel would witness the greatest demand impact over the next decade.

“Demand for nickel will be particularly boosted by the fact that NMC battery producers are in the process of increasing the already high share of nickel cathode from about 60% currently to 80%,” Oliva-Velez said.

He added that a shift was expected from the commonly known NMC 622 – comprising a ratio of six parts nickel, two parts manganese and two parts cobalt – to NMC 811, which comprises eight parts nickel, one part manganese and one part cobalt.

This shift, Oliva-Velez explained, would mainly be driven by EV and battery manufacturers’ objectives to reduce their exposure to cobalt, which was prone to price volatility and sustainability concerns.

This move, he averred, would mean that the demand for cobalt would not be as strong as envisioned by analysts a few months ago.

Fitch Solutions forecasts the demand for cobalt from EV batteries to grow to about 122 000 t, which is considerably less than the demand for nickel, lithium, iron and manganese.

Iron is also expected to attract a considerable demand-side impact as a result of the widespread use of LFP batteries in China.

Fitch believes LFP batteries will continue to account for about 27% of new EV sales in China by 2027. As a result, the company forecasts a cumulative demand for iron from EV batteries over the next decade to amount to about 259 000 t, second only to nickel.

New EV sales in China are forecast to reach over two-million units by 2027, compared with 1.2-million units in Europe and 403 000 unit sales in the US during the same period.

However, in the US, a significant presence of Tesla’s NCA batteries in a domestic EV market would largely define the country’s demand trend, Oliva-Velez said.

According to estimates by Fitch Solutions, Tesla’s NCA batteries currently account for 65% of new battery sales in the US and will continue to account for about 30% of new sales in that country by 2027.

Oil & Gas

Meanwhile, Fitch Solutions oil and gas analyst Richard Taylor said the penetration of EVs into the traditional transport sector would be a key disruptor to the oil and gas industry over the longer term, as the erosion of conventional fuel demand entailed a number of risks.

Over the next decade, a gradual structural decline for refined fuel consumption in several developed markets could be expected, he said.

This, Taylor explained, would be predominantly driven by the improved fuel efficiencies of conventional internal combustion engines (ICEs). However, the penetration of EVs and the demand that these exploit from the market would also add to this trend.

Fitch Solutions estimated the global cumulative fuel demand to be displaced by the sale of new EVs to be about 447 000 bbl/d by 2027, which, Taylor said, suggested a minor drag on global refined fuel demand rates. This slowed the cumulative figure from 4.2-million barrels to just under 3.8-million barrels in 2027.

However, despite a loss in demand being relatively small, the growth of EVs represented a significant set change for the downstream sector and changing the way transport fuel was accessed and consumed, Taylor pointed out.

The displacement trend itself would be a longer-term dynamic for the market, in line with the growth in EV users.

China, as expected, would dominate global EV sales. Consequently, the company expects the greatest displacement of fuels to be seen in this country, with a cumulative total of 211 000 bbl/d in fuel demand displaced by EV sales in 2027.

Europe would see the second-highest displacement, although with much lower volumes than China, registering a cumulative total of 61 000 bbl/d of displaced fuel from new EV sales by 2027.

“It’s also important to note that EVs sold in China in 2027 will likely displace more fuel than an EV sold in Europe, and it will be replacing a less efficient ICE vehicle,” Taylor noted.

The importance of this, he added, was that, while the headline volumes of fuel demand displaced by EV sales in Europe might seem to be much lower, this was partly due to the assumption that the conventional fleet would be consuming less fuel by the end of the decade.

However, the impact on the downstream players and the transformation of the traditional downstream business model would still remain in play.