Insights Industry Insights Supply Stable as Demand Increases Significantly

       

Batteries: Supply Stable as Demand Increases Significantly

Batteries power our laptops, our cell phones, and our portable music players. Batteries are an integral part of society today and are expected to increase. In fact, retail stores that specialize in only batteries are setting up shop all over the U.S., each carrying over 12,000 types of batteries. Demand is continuing to grow with the advent of newer, portable technology and as more consumers transition to hybrid vehicles. The global market for battery powered products was worth $425.3 billion in 2007 and is expected to be $443.2 billion in 2008. Will the industry be able to keep pace?

SUPPLY

Producers seeking to boost production

Cobalt is a rare metal used in batteries for mobile phones and hybrid cars. With the increased demand for the material driven by the increasing demand for batteries for mobile phones, electronics and hybrid cars, the cost of cobalt has skyrocketed to historic levels of $40.25 per pound. Only about 65,000 tons of the material is produced annually, which just barely meets current demand levels. The demand for cobalt continues to increase through new applications and an increased dependency on rechargeable batteries, creating a discrepancy between the supply and demand – significantly impacting the number of batteries able to be produced while simultaneously driving the prices for both cobalt and the products it is used in higher and higher. In part, due to these concerns, some companies are hoping to boost cobalt production in 2009.

Recycling increasing

The recycling of used batteries is important to the industry from a raw materials standpoint. With the advent and growth of rechargeable batteries, recycling programs have increased. In 2006, New York City passed a law requiring that all rechargeable batteries be recycled; California has a law that requires cell phone companies and retailers to accept wireless phones and batteries for recycling purposes. These recycled materials are used in place of raw materials. The lead and plastic from over 50 millions batteries is recycled each year by Exide Technologies – providing 90% of the lead needed for the production of new batteries in their facilities. By incorporating the recycled materials of old batteries into the production of new batteries, manufacturers are able to keep pace with growing demand.

DEMAND

Electric vehicle demand increasing

As automakers transition from gas powered vehicles to electric hybrid vehicles, the demand for batteries, specifically lithium-ion batteries, is going to increase – significantly. It is estimated by industry experts that the demand for hybrid electric batteries will be a $10 billion industry by 2015. U.S. automakers and battery manufacturers have already begun to lobby Congress for funding to help with battery production in the U.S. to meet this increasing demand. Currently Asian companies have a 20-year head start on U.S. companies for the development of rechargeable batteries specifically intended for auto use. In fact, the number of batteries that can be manufactured significantly impacts the number of hybrid vehicles able to be produced.

Portable video and audio demand increasing

As we know, the use of batteries is widespread. Portable video equipment and audio gear use batteries for some form of power. According to the Bureau of Economic Analysis, real personal consumption expenditures on portable video and audio goods are on the rise. From 2000 through 2006 portable video and audio good purchases have increased by over 154%. The demand for batteries is increasing as new technology introduces new products dependent on batteries. From 2006 to 2011, it is forecasted that the demand for batteries will increase another 6% per year.

 

Military demand strong

Of all the segments of purchasers of portable, battery powered products, the fastest growing segment is the military. In 2007, military expenditures of these types of products totaled $1.3 billion. By the end of 2008, it is forecasted to increase slightly to $1.8 billion but is expected to jump significantly to $3.2 billion by 2013.