Electric vehicles (EVs) and energy storage have dominated the narrative in the metals and mining space. As announcements on EV targets by automakers and governments grew ever more bullish, panic around the security of raw material supply started to build – reinforced by unsuccessful attempts by auto industry giants to lock in long-term supply deals.
The supply scramble has continued into 2018. Some such as Toyota and others have gone 'upstream' and bought equity in lithium mines. While sightings of Elon Musk in Chile started rumours that the poster child of EVs may be about to do the same. Perhaps BMW may have pulled off the biggest coup so far if reports that they have signed a ten year deal for lithium and cobalt turn out to be true.
Electromobility is in its infancy, and the growth in electric vehicles and energy storage will completely transform the lithium and cobalt industries. Demand for battery raw materials is growing at an unprecedented rate. To meet this demand, we now offer a Battery and Raw Materials Service that covers multiple metals’ markets in one convenient package.
We've taken a sample from the service that looks at supply and demand for each of the key metals markets in the Battery and Raw Materials Service:
Lithium prices remain high
That lithium prices maintained such high levels over 2017 surprised many in the market, with some sceptical the 'lithium wave' could last the course. We saw a number of key supply developments that will radically alter the shape and structure of the industry in the coming years.
Australia saw the number of players in the lithium sector increase last year with the addition of new hard-rock spodumene concentrates and direct shipping ore (DSO) operations, which will be key to meeting lithium demand in the medium term.
Yet despite all the new 'supply', lithium carbonate and hydroxide prices remained at high levels. This likely lies in an imbalance in conversion capacity. Firstly, we have the lag between spodumene concentrate being shipped ex-Australia and converted into lithium chemicals in China. Secondly, we have the ownership disparity between the Australian mines and Chinese converters, where the three majors Albermarle, Tianqi and Ganfeng dominate conversion capacity within China.
We expect lithium demand to grow from 233 kt in 2017 to 405 kt by 2022. The supply response is under way, but will take some time before this new capacity materialises as battery-grade chemicals. As such, we expect relatively high price levels to be maintained over 2018. However, for 2019 and beyond, supply will start to outpace demand more aggressively and price levels will decline in turn.
Cobalt prices surge higher
If 2016 was the 'Year of Lithium', then 2017 was undoubtedly cobalt's turn to take the crown. The little blue metal was the star performer among its peers, rising 109% between January and December.
Cobalt prices have surged higher in the early part of 2018, with the LME cash price averaging US$80,875/t over February – up 4.4% from January levels and 133% year-on-year. Crucial to the cobalt story is the new mining code in the Democratic Republic of Congo (DRC), which has the potential to seriously affect mining projects under way in the country.
49% of cobalt demand was from the battery sector last year. By 2022, we forecast cobalt demand from batteries alone to reach 98 kt – or 61% of the cobalt market. While such a figure would have seemed unrealistic a few months ago, the incremental supply from Glencore, ERG and others now means that we expect significant surpluses in the years 2019 to 2022.
Nickel is increasingly used in batteries
Nickel prices reached a new high in February at US$14,125/t (US$6.40/lb), and averaged the month 5% higher than January levels. As prices continued their upward progress in February, we have revised up our forecast for the rest of 2018 so that the average for the year now stands at approximately US$13,460/t (US$6.11/lb).
Although batteries account for a much smaller portion of nickel demand than lithium and cobalt, we saw increasing interest in nickel for batteries in 2017. Several western nickel producers tried to increase availability of products for batteries/chemicals (powders or sulphate) at the expense of their more customary products (briquettes). Overall, we estimate global nickel demand to increase along with battery consumption in the short and long-term.
What's happening with nickel supply?
We expect global mined nickel production to increase with almost all of the growth coming from Indonesia as it ramps up both domestic nickel pig iron (NPI) production and the export of ore to China.
Although nickel stocks may continue their decline through 2018, that trend might slow down in 2019-20 as the above mentioned increases in supply will reduce the global deficit in those years to levels close to balance. As a result, we believe nickel prices will moderate in 2019, averaging US$12,670/t (US$5.75/lb) for the year.
Find out more about the Battery Raw Materials Service
The Battery Raw Materials Service provides a foundation in the economics, market landscape and technology advancements which allows you to:
- Understand future supply trends with a granular breakdown of existing mines, processing and refining facilities and future projects
- Utilise our in-house integrated electric vehicle (EV) and energy storage forecasts to predict battery and metals demand
- Stay up-to-date on developments in battery chemistries and other technological trends
- Analyse trade flows and patterns for intermediate and finished products
- Leverage our price forecasts for benchmark and ‘battery grade’ metals