Where are the supply challenges?
Supply side challenges for battery raw materials and development of batteries may put the brakes on the EV revolution – our analysis suggests there is not enough 'stuff' to go around.
Demand for lithium remains strong and base case capacity is set to ramp up in the longer term. However, the supply picture for nickel and cobalt is far more challenging.
The economics of cobalt
Cobalt’s unique characteristics mean it is uneconomical to mine on its own and it is mined mainly as a by-product of other metals – primarily copper and nickel. As the cobalt market tightens in the long term, the inability of mined cobalt to respond to increasing demand will be a huge challenge.
Its overwhelming reliance on supply from the Democratic Republic of the Congo (DRC) is only going to increase over the coming years, as it is home to all the largest cobalt-bearing projects under consideration. And geopolitical risks in the DRC are only on the up.
Our base case view has cobalt demand essentially doubling by as soon as 2025 although we believe that the cobalt market will slip into surplus for the next few years.
Nickel miners needed
Nickel’s long-term fundamentals were already looking tight before the current enthusiasm for electric vehicles. Nickel has seen several years of low prices and under-investment. New demand from EVs and energy storage creates a widening supply gap through the 2020s – and there seems to be little appetite for new investment in nickel projects.
How do we solve the supply gap conundrum?
What needs to happen to prevent raw material supply challenges from pausing the EV revolution?
The key will be more investment – new mines need to come on stream – and advances in technology to introduce new battery chemistries will need to be made.
Work is ongoing to drive improvements in energy density however changes in the industry take time and can be hard to predict.
One thing is for certain - the battery raw materials sector will continue to evolve. The pace of change in the sector could dictate the speed of the EV revolution.