Clean energy might be the future, but there is no game plan – how the PGMs stand to break out

Over the next two decades, the world’s ability to supply resources is going to be pressed to its limit, and no other market segment is going to be harder pressed than materials needed for the transition to automotive clean energy.

Over the past four years, I have become a student of these transitions and the metals markets that enable the same. I have become jaded with our global market analysts not doing more to scream and shout, and drawing attention to the obvious constraints that lie ahead in terms of resource limitations. Let me do my best to lay this out in an easy to digest fashion.

Automotive Sales Forecast

We need to start with an assumed trajectory on vehicle sales. There are dozens of analyst views for long-range forecasts through 2040 or 2050. The following is an aggregate of multiple analyst views. I show a modest global demand of 134 million vehicles by 2050, with a mix if fuel cell electric vehicle’s (FCEV), battery electric vehicle’s (BEV) plug-in hybrid electric vehicle’s (PHEV) hybrids and conventional internal combustion vehicles (ICE). I highlight the Li-Ion and Platinum group metal three-way auto catalyst demand generating configurations. Of course FCEV’s draw on platinum for their proton exchange membrane (PEM) based fuel cells catalyst.

Source: Precious Metals Commodity Management LLC

It must be noted that the range of analyst and clean energy proponent views vary dramatically forecast to forecast. Some of the biggest distinguishing factors in these views can be boiled down to five major themes:

A. Internal Combustion Engine: Some illustrate ICE engine forecast migrating to zero by 2040. I don’t think this is at all possible based on the analysis that will ensue in this report. Meanwhile there are real global constraints in front of us with Palladium (Pd) and Rhodium (Rh) shortages not even able to meet the next few years of auto catalyst demand growth.

It is not clear how these Pd and Rh gaps close. Maintaining emission controls to meet the tightening standards and tightened test protocols is going to be difficult.

B. Battery Electrical Vehicles: Some forecasts have BEV sales climbing to 20M, 40M, or even 60M/year by 2040 or 2050. Jumping ahead in my analysis, the world will struggle to make 15M BEV’s, with lithium battery materials constraints. Nickel, lithium, cobalt, vanadium, and graphite are all shown to be in significant structural deficits by 2023/27 trying to make 3M to 5M BEV’s a year. With Lithium Battery densities achieving only 2x to 2.5x gains with foreseeable technologies like lithium-oxygen, how do we achieve 20M, 40M or 60M BEV’s a year with increased hybrids, too? We can’t without substantial expansion in low-cost mining. Mining exploration and investment won’t happen without significantly higher material prices. Higher prices take BEV’s from a near competitive cost position with gasoline to not cost effective. So net-net I don’t see a path to more than around 10M-15M BEV with reasonable lithium BEV battery costs to remain on par with gasoline.

C. Fuel Cell Electric Vehicles: Some analysts show deep penetration rates of fuel cell electric vehicles. Long-term FCEV penetration rates beyond about 5%-8% of the global fleet are totally unrealistic with current PEM technologies and best available projected design thrifting efforts. In fact 2% light duty vehicle penetration with today’s loadings would be a challenge. So why are we pursuing light duty fuel cell vehicles? We shouldn’t be. Regulators would be wise to wake up to these constraints in light duty, think about the wasted costs of light duty residential refueling infrastructure deployment, and shift all of our fuel cell efforts to heavy duty transportation needs. A more reasonable and impactful plan would be the 100% transition of HDV trucking, busses, and passenger trains and then spend remaining available platinum global resources on stationary and hydrogen generation via PEM (coupled with substantial alkaline) electrolysis. Light duty vehicle global conversion to FCEV’s is a pipe dream and an expensive plan subsidizing expensive refueling stations for light duty vehicles. More on this later.

D. New Regulatory Pain: Compounding these complexities in this analysis are the corporate average fuel economy (CAFE) style automotive OEM emission penalties like those in the EU starting 2021. One analyst forecast shows a projected $39.1B USD worth of OEM penalties for not meeting the fleet emission standards in the EU spread across the entire industry. Volkswagen is projected to bear the brunt of these penalties with over $10.3B USD projected fines for that firm alone. This is the key motivation behind OEM’s rolling out of dozens of new BEV models at this year’s Munich Auto Trade show. These penalties are sales volume based. If the BEVs are not cost effective versus gas by 2021, and they likely will not be, why would they general public acceptance to buy these vehicles in scale? There is a catch-22 here, and the general consumer will ultimately pay the price. Impact: So a $10.3B projected penalty on 1.75M Volkswagen European union vehicles sold is equivalent to $5,942/vehicle in penalties? Or diluting for all of the EU, $39.1B in total EU penalties on 17M EU vehicles sold is equivalent to $2,300 per vehicle in average penalties. My view is that EU total auto sales will suffer dramatically as a result when these fines are passed onto the consumer. Strangely, the EU car producers VW, BMW, FCA, and Renault, will be penalized the most, opening the door to more non EU-based OEM’s, like Toyota, to take EU-vehicle market share.

E. Shared Economy: One of the biggest questions that remains is how many cars does the world need or want? The bulk of the projected remaining vehicle global sales growth is in China, South America, and southeast Asia including India, Indonesia, Thailand and other maturing markets. The per capita vehicle ownership rates are far below the western world in these regions. One key argument against a total global vehicle growth pattern towards 150M vehicles a year is that Indonesia, India and other countries will not enjoy the rapid wealth accumulation like China has enjoyed to date. Another great argument is that today’s younger generations are more likely to support a shared economy, especially in population’s hubs where car ownership is at its lowest levels in the western world. Shared driving services and mass transportation growth are supplanting car ownership for sure in the larger western cities with Millennials. Projecting these impacts on global vehicle sales is a difficult challenge.

So right, wrong, or indifferent, this analysis is based on the aforementioned growth in vehicles annual sales. Let’s get into the next layer of materials supply constraints. As I learn more, I will tune my global sales forecast accordingly. More to come by 2020 on this topic. So let’s get into global material constraints, on auto catalysts for ICE, on BEV’s, and on Fuel Cell vehicles.

Auto Catalyst Materials Market Constraints

Clean energy advocates have written off the internal combustion engine. I am here to tell you these ICE engines are not going away as fast as some might think. There are multiple problems that this segment generates with their emission control systems. They all use platinum. palladium, and rhodium for emission control. A listing and brief description of their key constraints is as follow:

Platinum is the preferred element for heavy and light duty diesel vehicles. About 38% of the global supply of Platinum goes into emission control systems. Diesel light duty vehicles have dominated the EU landscape, but on the heels of Diesel-Gate have been in decline, pushing more EU demand towards palladium-rich gasoline emission control systems. Gasoline hybrid EV’s are the new preferred low cost alternative, especially in higher-cost gasoline regions of the world like the EU, Japan, and California.

• Platinum for Palladium gas emission controls design swaps have been talked about for the past three years. Long story, short: it’s a more complex set of design issues than most understand. Big auto OEM’s will transition their designs to use more Platinum over the next two years, relieving some of the strain on the Palladium market.

• Heavy duty diesel emission standards. Heavy duty trucks are a growing global market, with China volumes leading the way. These 10-16 liter diesel engines can consume one gram of PGM’s per liter these days. Again these diesel designs are skewed towards platinum loadings.

• No foreseeable Platinum constraints in the next decade. Few constraints are apparent over the next decade on platinum. This market should remain in surplus for several more years to come.

Source: Precious Metals Commodity Management LLC

Palladium is preferred element for gasoline light duty vehicles. About 90% of the global supply of Palladium goes into emission control systems. There are a half dozen issues putting added pressure on the Palladium market including:

Source: Precious Metals Commodity Management LLC

• China. China adoption of emissions standards on par with the western world is creating effectively a new set of demand for three way catalyst materials. The latest emission standard in China is China6 regulations which are requiring higher Platinum Group Metals (PGM) loadings than earlier designs.

Source: Precious Metals Commodity Management LLC

• WLTC + RDE Test Conditions (Worldwide harmonized Light-duty Test Conditions + Real Driving Emission test conditions). Actually the biggest effect in 2019 to increasing auto catalyst PGM loadings is the new Real World Test conditions placed upon the OEM’s. No longer is sticking an emission probe up your tailpipe for a 3 minute test now enough. Now OEM’s are being tasked with testing each models various powertrain configurations in a very lengthy on-road stress test, up hills, on the freeway, fully loaded, etc. This is in direct response to the Diesel-Gate issues where OEM’s were discovered to be shielding the true emissions performance during real world driving conditions. Well no more in China and the EU. The result, higher PGM loadings.

• Tightening global emission standards. Each year there are reduction in allowable limits of Carbon Oxides, NOX, Particle Matter, and Hydrocarbons tighten.

• Hybrids. Hybrids are fantastic. They are a cost winner for the masses. A Toyota Prius with 55 miles per gallon and only a modest size Li-Ion battery and EV motor on board makes the vehicle cost attractive, especially in higher cost gasoline regions of the world. Simply put: they pay for themselves in lower overall refueling and operating costs over the life of the vehicle. All good right? The bad news is they have frequent cold starts. Cold starts for any internal combustion engine is the most stressful part of the emissions testing. This is where the emission spikes (or what they call transients) occur. The design response is higher PGM loadings to countermeasure. Add in real world testing conditions, and this effect gets amplified. Cold starts on a hybrid running full speed on the freeway on electric, just to finally turn over the engine, is extremely stressful on emission spikes.

• Auto catalyst recycle. The recycle supply chain is crucial to the auto catalyst market. A great global sustainable collection network already exists. As PGM prices climb, catalytic converter thefts inevitably rise. Vehicles average around 15-years life, but those end-of-life catalytic converters and their PGM’s come back into the supply chain. That’s the good news. The bad news is that Silica Carbide and Titanium Aluminum substrates were introduced in diesel systems in volume around 16-17 years ago, and they are now showing up recycle at a rate of around 9% of the recycle lots are impacted. This rate will increase to 35% in the next 5-years adding more pain to the recyclers. These SiC and TiAl materials are difficult for the collectors, smelters, and refiners to manage. They muck up the recycle, forcing more frequent purges, lower operating efficiencies of the recycle network. Today I judge the global recycle smelting capacity to have some 7-9% excess capacity. With normal operational utilization rates and efficiencies you would prefer a full 10% capacity excess. More smelting capacity is needed— capacity that can process these materials efficiently. Today only Umicore has a robust smelting and refining process.

Source: Precious Metals Commodity Management LLC

• EU decline in diesel. Diesel auto catalyst is very platinum heavy. Gasoline and hybrids are Palladium heavy designs. The EU is moving away from diesel light duty vehicles. At its peak some 55% of the EU vehicle market was diesel. That ratio is dropping fast down to 30%, and currently appears to be holding. The net is more Palladium demand.

Net this leaves us with a long term palladium market balance that looks like this. A surplus from the increasing auto catalyst recycle plus increased mining that drives palladium into a surplus condition.

Source: Precious Metals Commodity Management LLC

Rhodium is what is termed a minor platinum group metal. South African is the primary source of
this mined material. It ends up rhodium is the key to NOX suppression. NOX, or nitric oxides, are
one of the primary pollutants being emitted by the transportation sector. Rhodium has always
been the key to managing those emissions. Note that the rhodium fix has more than doubled in
the first three quarters of 2019. I have previously written that rhodium is pulling a Thelma and
Louise act on us. Quickly touching on reasons why as follows:

• No clear NOX alternative designs that are cost effective. Some of the next best alternative designs cost 9x to 10x more than using expensive Rhodium.

• Rhodium is a great additive for durability of the catalytic converter. Durability in this context is the emission performance deterioration over the 15+ years of life of the catalytic converter. Certain pollutants that can enter into the emission system can poison the PGM catalyst. Specifically, Zinc and Potassium which increasingly prevalent in the latest synthetic motor oils used to achieve 5,000 mile oil change frequencies are unfortunately great at poisoning the PGM catalysts. Having increased palladium and rhodium loadings help protect the overall system emission performance over the life of the catalytic converter.

• Rhodium auto catalyst demand forecast is up. Even in the face of declining ICE vehicle sales globally, overall rhodium auto catalyst demand is still up. Big auto OEM’s simply are going to be forced into design thrifting based on constrained supply. When does that thrifting start is unclear.

• Rhodium supply is declining. Over the next 3 decades, rhodium mined supply will decrease. End of story. Key to today’s mined supply is South Africa’s Eastern and Western Bushveld Complex UG2 Reef, which is rich in these minor PGM’s, including rhodium, ruthenium, and iridium. Some of the oldest PGM mines and some of the deepest most expensive mines will approach end-of life over the next few years. New South African and Zimbabwe mines are under construction in the Northern Limb, tapping into the Platreef. This unfortunately will produce platinum and palladium, but the minor PGM’s ratios will be much lower. Overall minor PGM’s will decline in mined supply without additional PGM mining investment.

Source: Precious Metals Commodity Management LLC

• Few Rhodium investment populations to draw on. There is one small rhodium ETF, but the total holdings are less than one month’s supply. Speculative positions are fairly small as well. Big Auto OEM’s have built up physical positions to help manage the continuing crunch in supply.

• Thank goodness for the global slowdown. What happens when the globally economy picks up, and/or China trade war is settled? I keep saying this, and it is not always well received. Thank goodness for the global slowdown and China-US trade war. Imagine the Rh and Pd markets if we were on the same CAGR as before.

Net this leaves us with an unbearable market balance for rhodium that simply is not sustainable. Something needs to change in the loadings for auto catalyst to keep this market whole. What that change is and the impacts on loadings is impossible to forecast. Big auto OEM’s needs to show us a path.

Source: Precious Metals Commodity Management LLC

Hybrids are the most rapidly growing powertrain globally and for good reason: they are cost effective. Hybrids use small and low cost li-Ion batteries and small, lower-cost EV motors paired with a conventional gasoline engine. No need for a charging infrastructure with these hybrids. Locations like Japan, California, the EU, and even China with gasoline prices in the $3.18-$5.50/ gallon range find favor for these high gas mileage vehicles. Small up front vehicle added costs are easily offset over the life of the vehicle. Even battery replacement as needed is a cost and maintenance-manageable affair. Again the downside is higher PGM loadings in the catalytic converter.

Source: LMC Automotive Dec. 2018

Source: Precious Metals Commodity Management LLC

Plug-in Hybrids Electric Vehicles (PHEV’s) are another growing powertrain segment. Short range 10-40 mile mini EV’s are increasingly popular. Again small battery and small EV motors make these a cost attractive solution. Given that huge percentage of our driving habits keep our daily driving range under 40 miles distance, makes these solutions, especially in bigger cities, attractive for those who have access to charging stations. Once again, same as Hybrid vehicles, PHEV’s require higher PGM loadings in their emission control systems.

Mid to long range Battery Electric Vehicles (BEV’s) are thought to be the answer to lowering our dependence on fossil fuels. I’ve seen roadmaps showing 40M-60M BEV’s per year by 2040/50 in dozens of publications and trade shows. Why analysts show this I don’t even come close to understanding. There are huge structural deficits projected on Nickel, Cobalt, Graphite, and even rare earth element Vanadium.

Source: LMC Automotive Dec 2018

Lithium battery technology transition at a glance

To get through the BEV Battery discussion, we need to spend a short minute on the Lithium battery technology roadmap. This is an extremely simplified technology discussion as follows:

• Lithium-Ion (Li-Ion) Technology. Today’s Li-Ion battery technology energy density gains are slowing. We are fast approaching a design limit with Li-Ion technology on the Energy Density curve that this technology of batteries can obtain. This has a direct relationship to cost. The higher the energy density, or the power that a battery can house, the longer the resulting driving range that BEV can obtain on one charge. Today’s energy density CARG is

Energy Density growth in today’s Li-Ion space is slowing

Source: H. Takashita

Why increase battery density? Cost. Today’s 300+ mile range BEV batteries cost over $10,000 and weigh a couple of hundred kilograms. The sheer volume of Ni, Co, Li, Graphite, and other materials drives the resulting cost of the battery. Gains in Energy Density put the OEM’s in a position to decide if they want to cut the size of the battery while maintaining driving range or use the same size battery and extend the range of the BEV. I will contend later that battery size reductions are needed to scale BEV market penetration with the same mined plus recycle Li, Ni, Co supply chain.

I want to make note that the Li-Ion battery cost has been cut to a small fraction its original level over two decade ago, while more than doubling their durability and effective lifetime. Dramatic improvements have already been obtained through design optimization.

Source: H. Takashita

• Solid State. Soon, by 2025 there will be a transition to a Li-Ion Solid State design, where today’s fire and explosion prone liquid electrolyte will be changed to a solid or a gel, dramatically reducing the fire and explosion risk with the core Li-Ion battery technology. Initially it is thought that little energy density improvements from solid state will come at first, but that second generation solid state devices will be in a position to harvest some performance gain. Again every cut in the battery materials should help cut costs.

• The Next Battery Technology Beyond Solid State. Several battery types are being developed with the hope of being the next great energy storage technology. Most notable and perhaps most likely are Lithium-Sulphur (Li-S) and Lithium-Oxygen (often referred to as Li-Air). Here the hope is a more than doubling of the energy density of the basic battery materials, again further extended the potential BEV penetration rates that are possible with constrained materials supply.

• Could Precious Metals Enter Into The Battery Design? It is possible that a Palladium cathode layer could enter into the Li-Air design in particular. There are also some efforts using Platinum

Source: Panasonic

Critical Battery Material Market Constraints:

• Nickel: Multiple analysts have highlighted the probable gap in overall global Nickel production to meet the emerging BEV ramp. A solid lineup of mining projects are under consideration. However the projected structural deficits are alarming for Nickel. See the following analysis from Wood Makenzie. Closing this demand gap is a huge issue. Simply put, nickel prices need to continue to climb to get investment communities to increase exploration funding. The part of this equation that doesn’t make sense is the price of Nickel has a direct impact on the battery cost. As prices rise, so do battery costs.

Below are two analyst views on the Nickel market structural deficits going forward

Source: Wood Mackenzie

Source: BENF (Bloomberg)

• Cobalt: Multiple analysts, and even Tesla supply chain people have highlighted the probable gap in overall global Cobalt production to meet the emerging BEV ramp. Here there is a dramatic need to expand the global portfolio of Cobalt mining projects. Currently per pound, Cobalt is the most expensive element used in lithium batteries. This is part of the drive to reduce the cobalt loadings is to effect cost.

Below are three market analyst views of the cobalt market supply / demand balance. All three show a structural deficit starting between 2019 and 2023.

Source: BNEF

Source: First Cobalt

• Lithium: Investment in new lithium projects will be required to keep up with demand. Existing operational supply is in place to meet demand to 2021. For additional producers to meet the demands of the market in 2022, development would need to commence in 2019. Therefore without further investment in new projects there will be a supply shortage by 2022 where EV growth will accelerate as they reach cost parity with ICE vehicles Lithium supply chain requires further project developments to provide continuity of supply for EV’s. Below are four market analysts showing cobalt structural deficits starting 2027.

Top 10 Lithium Producers responsible for 79% of the Global Production

S&P Platts Global Market Insights

Below are four market analysts showing cobalt structural deficits starting 2027.

Without further project financing, the market is in deficit by 2021

Source: Prospect Resources

Source: Bloomberg New Energy Finance, Avicenne, USGS, IDTechEx,, Deutsche Bank

Lithium Supply/Demand Market Balance

Source: SFA Oxford / Neometals

• Manganese: No obvious supply constraints.

Lithium Ion Battery Market Manganese Demand

Mn used in NMC and LNMO Cathode formulations

Source: Cairn Energy Research Advisors and CPM Group

• Graphite: Today graphite is used in the following markets:

• Batteries: Forecasted for a high growth future, as demand for electric vehicles and energy storage is set to continually increase.

• Expandables: Fire retardant building materials which includes expandable graphite is forecasted to reach approximately 400 m by 2026 other areas include graphite foils and specialized gaskets.

• Refectories: Graphite is a mainstay component used in crucibles/refractories, steel production and lubricants.

The following are two analyst views of the Graphite supply and demand fundamentals. The market balance shows a structural deficit starting in the 2025-2027 timeframe.

Source: Benchmark Mineral Intelligence and Battery Minerals analysis

Source: BNEF (Bloomberg)

• Vanadium: V is primarily used in the production of steel today. Over 90% of the V mined is used for steel production. Another 4% of V is applied to titanium production, 4% to chemical applications and only 2% is applied to Lithium battery technologies today. With the projected BEV forecast, those ratios will change dramatically.

The following are two available analyst views of the supply and demand fundamentals for Vanadium. The market balance in both shows a structural deficit starting 2016.

Source: Caelot Ferroalloys Inc., Vanitec

Is the BEV projected ramp mythical? How do we achieve these 40M, or even 60M BEV’s a year build rate and achieve/maintain parity with gas ICE total cost of ownership? It is not clear that we cannot achieve this BEV penetration level without profound improvement in energy density, enough to make the batteries a fraction of their current size. We need to get the same energy density in a much smaller package. Li-Ion within a solid state design is the most probable technology transition around 2030. It should achieve 2x improvement over today’s energy density. So at best I can see a line of site to some 12M long range BEV’s with a reasonable mix of Hybrids. The 45M by 2050 shown in this migration pattern is NOT underpinned. Technology and low cost Li, Ni, Co, Graphite materials gaps must be closed through design or low cost mining sources

Source: Precious Metals Commodity Management LLC

Fuel Cell Catalyst Market Constraints:

We’ve beat on ICE engine auto catalyst PGM constraints. We’ve even described the increased loadings with fuel efficient Hybrids and PHEV’s. Palladium and Rhodium markets are, and will remain taxed for some time to come. Palladium should grow into a surplus supplied market as lower cost North American and Russian mining comes online starting around

We talked about the global BEV ramp limitations of the Lithium battery materials markets. Energy density gains from Solid State and Li-Oxygen (Lithium-Air) designs will be needed just to make more BEV’s with that same limited amount of materials available. Higher materials pricing is needed to spawn additional mining investment that is not apparent in today’s mining pipeline projects.

Now let’s discuss the next great powertrain technology transition. The zero emission Fuel Cell markets including Fuel Cell Electric Vehicles (FCEV’s). What can go wrong here? Spoiler alert: There is not enough Platinum being mined to grow the light duty vehicle market FCEV penetration rate to beyond about 2% today, and 5-8% at optimal design thrifted loadings of the future. Certainly there is not enough Platinum in the world to complete a 100% LDV transition to PEM based FCEV’s. This is shocking news to many in the regulatory and green energy fields.

Let’s consider how much Platinum goes into these FCEV’s today. The Toyota Mirai is the bestselling FCEV on the road today. The first generation Mirai had 33 grams of Platinum (Pt). The second generation contained 30 grams of Platinum as part of its catalyst. The third generation Mirai is coming out in a year, and is hopped to have as low as 16 grams of Pt. Hyundai sells a popular SUV called the Nexo which contains 56 grams of Pt. The US Department of Engergy is promoting a light duty trajectory of 0.1 grams of Pt per 1kW, or 11 grams equivalent for the light duty FCEV’s by 2030.

What is interesting is the loadings in class 8 big rig trucks that pull 80,000 pounds. The first generation Toyota FC stacks/Kenworth truck contained 2.5x Gen 1 Toyota Mirai stacks with a total of 82.5 grams Pt. The second generation big rig now uses only 2x Gen 2 Toyota Mirai stacks with a total of 60 grams Pt. That is actually quite efficient.

Toyota/Kenworth partnering on Port Of LA project

Here is the kicker. People think Fuel Cell displace huge amounts of Platinum in the auto catalyst in favor of the FC technology. Light duty vehicles globally today have less than 1 gram of Pt. Most of the 6-7 grams of gasoline auto catalyst used is Palladium, and little Platinum.

However, in heavy and light duty diesel, the auto catalyst is dominated by 75% Platinum loadings. For big rigs, 1 gram per Liter engine are used. That is some 14-18 grams of PGM’s of which 75% is Platinum, or 13 grams. If you need only 30 grams, and your displacing 13, then you need a net 17 grams incremental Pt to make heavy duty FC trucks.

In 2025, there will be a forecast 3.7M heavy duty trucks purchased globally. If they all used 17 grams of incremental Pt, that is 1.9 Moz of Platinum demand.

Conversely in 2025, let’s say there will be 95M light duty vehicles purchased globally, 1.9 Moz of Platinum will only convert 2.1M light duty vehicles to fuel cells (or 2%).

Heavy duty is a better fit, and the refueling infrastructure is lower cost. Larger and more hydrogen tanks per truck, and even a complement of Li-Ion batteries on board HDV’s gets longer range.

The value proposition of FCEV’s will be gated by the retail cost of the. Getting hydrogen on par with gasoline costs is essential to driving this technology to mass adoption.

Hydrogen cost (USD $/Kg) versus gasoline cost (USD $/gallon) simple transfer function is illustrated below. This assumes an ICE engine with 30 MPG vs a FCEV with 67 miles per Kg of hydrogen. Annotated on this chart is the actual retail price of hydrogen today at the 41 California LDV refueling stations. Thirty-six of these stations average $16.35/Kg, and five of these stations managed by air products have a retail price of $9.99/Kg. You can see the gasoline cost equivalence for gasoline. I have highlighted the average cost of gasoline, all expressed in USD $/gallon in multiple regions around the globe. Note that the bulk of the USA has very cheap gas ($2.50/gallon) with a country-wide average of $2.65. Separating California with its gas now surpassing $4.03 gallon. China is $3.18, and the EU averaged $5.44/gallon. Message: Hydrogen has to get down to $7-$9/kg retail price to be on par with most of the global gasoline prices, otherwise refueling costs will be higher than ICE. Today the hydrogen retail costs are higher than gasoline.

Source: Precious Metals Commodity Management LLC

Hydrogen cost dilemma

Today in California over 40% of the retail cost of the hydrogen is the physical distribution of H2 in gas form. Trucking H2 in gas form is very expensive. Generating hydrogen in close or immediate proximity to a heavy duty truck refueling station or point of H2 consumption is the best business model.

Heavy duty FC truck company Nikola has partnered with NEL, and PEM and alkaline electrolysis expert. They are promoting a plan to build 700 heavy duty H2 refueling stations across the primary trucking routes in N. America. NEL has a series of shipping container sized deployable PEM and alkaline electrolysis products.

They have a plan to install Solar PV panels on site at each station to generate what they hope is 30% of the power requirements of the station. The balance of the energy required will ideally be a renewable resource at subsidized rates for daytime consumption of surplus energy. Getting your power at

Nikola’s day cab model, the Nikola Two, carries 80 kilograms of hydrogen and can travel up to 750 miles between refills. (Rendering: Nikola)

Artist’s rendering of a Nikola hydrogen station, with solar roofs, islands for passenger cars in front, truck islands on
the right and a Ryder maintenance facility on the left. (Rendering: Nikola Motor)

Nikola’s Planned H2 Refueling Stations – Station sizes would vary, but most would be a standard size that can make up to eight tons of hydrogen per day.

• Each to store and dispense up to 10 tons, or 9,091 kilograms

• Nikola plans to purchase renewable energy from outside suppliers if additional electrical power were needed to run a station’s equipment.

• The company also may build its own solar farms in several remote locations to distribute renewable energy directly to some of its stations.

• Each of the filling stations would include a building housing the hydrogen-production equipment, storage tanks and compressors, and chilling facility for the H2 gas.

• Many of the stations also would have service bays staffed by Ryder System, Nikola’s maintenance partner.

• Each station would have eight dispensers for heavy duty trucks – capable of pumping 176 pounds (80 kilograms) of compressed hydrogen gas, the amount needed to fill an empty Nikola truck’s tank, in 10 minutes.

• Nikola also plans to provide four dispensers for hydrogen fuel cell passenger vehicles and light trucks at each station.

Conclusions

Auto Catalyst Emission Control Systems

Gated by structural deficits in Pd and Rh.

• Palladium: Design swaps coming soon to load more Pt in place of Pd will help, but Palladium likely to remain in deficit until new incremental Russian and N. American mining comes online to augment supply, coupled with increasing auto catalyst recycle supply.

• Rhodium: No clear cost-effective design work arounds exists today. Big auto OEM’s will need to devise a way to lower loadings. What and when that change comes should be apparent in the next year.

• Look for Pd and Rh markets to continue in deficit, and prices to continue to climb until big auto OEM’s change designs.

Battery Operated Vehicles (BEV’s, PHEV’s, Hybrids)

Gated by structural deficits in Ni, Co, Li, Graphite, and Vanadium. These constraints hit with building a planned 5M BEV’s a year. How do we then make 20-60M BEV’s?

• Nickel: Structural deficits starting 2023/24.

• Cobalt: Structural deficits starting 2023/24. Prices should begin to rise at that time.

• Lithium: Structural deficits starting 2027.

• Graphite: Structural deficits starting 2024.

• Vanadium: Structural deficits starting 2020.

Fundamental to the Lithium battery space is the projected Energy Density gains from both Solid State transition in 2025, and then either Li-S or Li-Air by 2030. The hope is that Li-Air will double or triple todays Li-Ion battery energy density, cutting the materials requirements by 2x to 3x. If we are constrained making 5M BEV’s, these technology changes should double or triple that production capability. Any long-term plan showing BEV’s over 10-15M are highly suspect, and the battery materials sourcing simply are not underpinned.

Higher Ni, Co, Li, Graphite, and V prices are needed to spawn additional exploration and investment. Higher prices of course add to the cost of the batteries and BEV’s.

Fuel Cell Electric Vehicles

Everyone thinks light duty FCEV transition is what fuel cells are all about. Focusing all of the world’s available Platinum today we could convert only 2M FECV’s globally. Focusing instead on the 3M+ heavy duty trucks and busses are by far a better and more economical solution. Any road map showing over 8M FCEV’s is highly suspect, and the Platinum sourcing required is not underpinned.

Any mass commercialization volume ramp of FC vehicles will require a dramatic reduction in the hydrogen retail cost. Achieving a true $7-$9/kg hydrogen retail price is essential to achieving parity with gasoline refueling costs.