Battery raw materials market participants had hoped for an economic recovery following the phase-1 trade deal between the United States and China. A drop in demand for EV battery materials from China could extend to producers in South America and Australia, but disruptions to Chinese exports could tighten global supply for processed lithium, especially in Japan and South Korea.

Supply and stocks 
  • Market in a significant oversupply situation, and stocks of ore and spodumene are high globally, but production cuts are being made at raw material end. 
  • We expect China's demand for imported battery raw materials to fall, causing an increase in stockpiles in South America and Australia. 
  • As China exports some processed material to South Korea and Japan, there may be delays in exporting this material - this could see seaborne prices get some countertrend lift.
Demand 
  • We expect already weak demand in China to be hit further as demand for NEVs suffers while household and business confidence likely deteriorates in the short term. 
  • But European original equipment manufacturers (OEMs) relying on lithium battery cells from Asia may suffer supply chain disruptions - this could hit EV manufacturing. 
  • If prolonged, disruptions will this persuade the EU to delay the introduction of CO2 penalties, penalties that the traditional internal combustion engine OEMs cannot really afford anyway given the depressed auto market. 
  • Demand for cathode materials from non-Chinese based production likely to pick-up.
Lessons learned 
  • Avoid being dependent on supply chains from one country/region. 
  • Shorten supply chains and diversify supply chain were possible. 
  • Should be good news for European battery industry.
See also - Coronavirus impact on battery raw materials: Cobalt

This article has been written by
our team of analysts at Fastmarkets, who are responsible for providing an independent view on market developments and forecasting their future performance.