Battery raw materials could suffer from supply bottlenecks in the middle of the 2020 years
Every electric vehicle battery has a complex chemistry of metals - cobalt, lithium, nickel, and more. The electrification of transport is changing the demand and supply of these battery raw materials. In fact, we expect double-digit growth in battery raw materials for the next decade. And our most recent research suggests they could face a supply crisis by the mid-2020s and put pressure on the supply chain for battery raw materials.
What do the long-term prospects for battery raw materials mean for the penetration of electric vehicles, the metal supply chain and those who invest in them?
Could battery resources be exposed to a supply crisis?
What drives demand?
- Total sales of passenger cars (EV), including hybrid electric vehicles (HEV), increased by over 24% last year
- The worldwide electric car sales (with plug) will make up to 2025 7% of all car sales, up to 2030 14% and up to 2040 38%
- The size of the batteries continues to increase in the medium term
NMC 811 cells are manufactured on a larger scale, resulting in increased nickel demand at the expense of cobalt and lithium - Most car manufacturers plan to drive 2050 completely electric
What are the long-term prospects for battery resources?
We have raised our demand estimates since our report on the second half of 2018 due to the factors mentioned above. Here's our last long-term outlook for lithium, cobalt, nickel, graphite, and manganese.
Decline in lithium prices in progress
Lithium carbonate spot prices have fallen 2018 by nearly 7.000 USD / t since June.
We see the same weakness in realized prices for major commodity producers and their expectations for the first half of 2019. And this in an environment in which the large brine producers in South America could not expand their capacities. The first-aiders of the lithium boom, the Australian hard rock mines, are clearly in a position to quickly deliver the required quantities.
In the meantime, the bottleneck on Chinese conversion capacity that supported prices is easing as China emerges as a net exporter of lithium chemicals to the region.
It only took a few years for the battery sector to become the most sought-after driver for lithium. By using lithium in each type of lithium-ion battery, annual growth will be in the double digits and 2030 will exceed 80% of total lithium demand.
Cobalt prices have dropped this year
Like lithium, cobalt prices in the first half of 2019 also fell. The low prices may delay some mining projects and should lead to a decline in craft production from the Democratic Republic of the Congo. However, the industry has to deal with a surplus of intermediates until 2024. And the existence of a swing offer in China should limit any major price increase. Cobalt looks challenging in the long run. However, the introduction of high-nickel batteries in electric vehicles means that the emerging deficits appear more achievable than previously expected.
Indonesia key for nickel
Although the battery sector's share of nickel demand is much lower than other metals, it will be a challenge to procure the amount of nickel that electric vehicles will need by the mid-2020s. A low nickel price has hampered any project development, and with lead times of often up to 10 years, investments now need to be made.
While high-nickel ternary batteries mean a correspondingly higher demand for nickel, such as cobalt, our long-term deficits become more feasible. Much of this is due to growing capacity in Indonesia to serve both the stainless steel sector and the emerging demand for batteries.
Business as usual for graphite
With graphite, the basics hardly change. Although demand is very high, due to the growing supply from East Africa, we do not expect supply-side challenges in natural graphite flake. Synthetic graphite poses a greater challenge as the needle coke feedstock may be disrupted due to the new IMO 2020 regulations and the growth of the Chinese steel sector.
Manganese central to NMC batteries
The manganese industry is mostly driven by the steel sector, which is unlikely to change, no matter how many electric vehicles are traveling. A steady supply of manganese sulfate will be critical to NMC battery manufacturers, but we see no supply side issues in this area.
What does this mean for investors in battery resources?
Despite the emerging sharp surge in demand, there isn't much to upset investors about. Satisfying the demand is currently not a challenge for key metals. In many cases, supply chases demand. If the penetration of electric vehicles increases to 10% and more, the current falling prices are a thing of the past.
Text and image: Wood Mackenzie Translation: Institute for Rare Earths and Metals August 2019
