Battery raw materials risk outlook - projections for 2025-2030
What are the greatest risks to the battery raw materials market and supply chain in 2025-2030?
Battery raw materials present a significant risk to the electric vehicle (EV) market as supply deficits, price volatility and geopolitical tensions create disruptions to the supply chain. Our recent battery raw materials risk matrix not only provides a holistic view of the risks to the current market, but also shows how they will evolve in 2025-2030. What do these projections look like? Read on to find out.
The numbers next to the ten risks below correspond to their placement on the matrix above. The second matrix shows the projection for each in 2025-2030.
1. Price volatility at elevated levels complicates financial performance
2. Supply deficits hold back EV growth
3. ESG concerns complicate local supply
4. Geographic concentrations create supply and logistics risks
5. Limited scrap supply holds back investment in recycling
6. Slow pace of building charging infrastructure slows EV adoption
7. Aged price mechanisms hinder investment
8. Rapid growth of indexing complicates path to $100 per kilowatt hour
9. Inability to clean up supply chains creates reputational risk
10. Geopolitical tensions disrupt production and logistics
What are our projections for each of these risks in 2025-2030?
Risk 1: Price volatility at elevated levels complicates financial performance
High prices are not likely to slow EV growth, because governments and automakers will find ways to get around the high costs of battery raw materials and EV batteries, but these will still likely have an impact on designs and financials. High costs could result in changes to battery compositions, offering batteries as a service, or even through leasing EVs to consumers to mitigate upfront costs.
Risk 2: Supply deficits hold back EV growth
Finding new sources of lithium supply is critical to meet the increasing deficits we expect to see in current and known supply. Investments are being made into more sustainable lithium extraction technologies, including direct lithium extraction (DLE), which would reduce the overall amount of time needed for the lithium extraction process and bring new sources online.
Risk 3: ESG concerns complicate local supply
As countries and governments are more urgently looking to reach CO2 targets, we would expect to see an increased volume of local opportunities for local supply to come online, whether through recycling, DLE, or other local supply opportunities. However, local laws and regulations do present challenges for current and planned projects, so this would exacerbate expected supply deficits.
Risk 4: Geographic concentrations create supply and logistics risks
Raw materials are geographically concentrated, but we expect to see more evenly distributed supply in 2025-2030. However, this is a risk that must factor in the impact of Covid lockdowns, conflicts, resource nationalism and other local issues so its impact and likelihood are not likely to show significant change.
Risk 5: Limited scrap supply holds back investment in recycling
Recycling is going to play a much larger role in supply of BRMs in 2025-2030, and more government legislation and commercial ventures come into play. We are already seeing partnerships emerge, whether between Battery Resources and Honda, or Glencore and Li-Cycle, as a result of the tightness in supply in the current market. The likelihood of risk declines but the risk impact rises because of the growing pressure across all supply sources in the BRM market.
Risk 6: Slow pace of building charging infrastructure slows EV adoption
With EV penetration continuing to grow and complementary retail opportunities arising, we expect to see governments and commercial entities accelerating the investment in and roll-out of charging infrastructure. This includes charge point devices, site preparation and installation to support the growing EV fleet and limit the number of charging deserts in less populous areas.
Risk 7: Aged pricing mechanisms hinder investment
In 2025-2030, we expect that indexing to spot prices will take a larger share of trading in the BRM market, to support a larger base of incentive-level prices and reducing investment risk. This would be a shift from today’s trade, where a meaningful portion is locked into long-term contracts in a way that does not serve the strategic aims of the EV market.
Risk 8: Rapid growth of indexing complicates path to $100 per kilowatt hour
Indexing will likely take a larger share of trading and higher prices will flow downstream. In this period, higher costs would eat into margins and complicate affordability, particularly for economy vehicles, so we could see pressure on automakers to make performance sacrifices that would make an EV less attractive to the consumer.
Risk 9: Inability to clean up supply chains creates reputational risk
EVs will play an even larger role in automakers’ brands in this period, so we can expect greater scrutiny from watchdog groups organized to expose perceived greenwashing. In 2025-2030, we expect a steady improvement in cleaning up supply chains, particularly with more advanced tracing capabilities and greater brand consequences.
Risk 10: Geopolitical tensions disrupt production and logistics
The likelihood of this risk remains the same in 2025-2030, but with more supply sources and greater geographic diversity, the impact of any future conflict would lessen. However, the strategic nature of BRMs to the global energy transition may increase the level of resource nationalism and/or measures taken to protect the battery markets.
Want to know more? Read the full report
If you want to understand more about how we see the risks to the BRM market today, including battery raw materials prices and additional insights from our experts, you can access the full report via this form.
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