Do we have the battery materials to meet the demand of the future?

Access the replay and read the five key takeaways from our recent webinar ‘Addressing risks in the European and US battery and EV markets’

Future supply and price of battery materials came out as a top priority among attendees at our recent Fastmarkets webinar, ‘Addressing risks in the European and US battery and EV markets’. We look at what the future holds in terms of supply and demand for these essential battery materials and whether new technology and battery chemistries will pave the way for supply going forward.

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Our expert panel, William Adams, Jordan Roberts, Rob Searle, Muthu Krishna and Amy Bennett discussed the future of the battery materials sector. Below, we shine a spotlight on five of the key takeaways.

1. Demand for lithium can keep up with supply

From our Fastmarkets NewGen Long-Term Forecasts, we know that demand for electric vehicles (EVs) and therefore battery materials will be second to none across this decade and beyond. However, we are also broadly expecting supply to keep up with demand over the next ten years. This is not to say that we may not see periods of deficit, but we also expect to see some periods of surplus.

Quiet confidence in this can come from the current high margins that we are experiencing, as well as new technologies such as direct lithium extraction (DLE) for some of the more unconventional resources. These technologies are not without their challenges in terms of the speed at which they will come to the fore. Although they do not invite as many ESG concerns as other lithium extraction techniques do, achieving the grade needed for EV batteries is more of a challenge. The market looks to remain finely balanced in terms of supply and demand over the next decade and beyond.

2. Lepidolite could play a key role in lithium supply

Increased supply of lithium will reduce the pressure on the lithium market and potentially slow the deployment of alternative battery chemistries such as sodium-ion. Expected supply from lepidolite and spodumene is likely to mean less pressure on the market, lower prices and therefore less appetite to switch to sodium-ion, which has poorer energy density.

Will Adams, head of battery and base metals at Fastmarkets, noted that we should not underestimate the resourcefulness of China. If China can tap its lepidolite resources, this could have a significant impact on supply. History tells us that there is a strong chance of success in this area, with China already transforming the nickel market with nickel pig iron as an example of their creativity in gaining new supply when the market demands it.

Currently, lepidolite refining practices to yield lithium are underdeveloped and fewer companies are focusing on lepidolite exploration, but with high demand for battery materials expected to be sustained over the next ten years, this is likely to change. Lepidolite is often overlooked in favor of spodumene, which was also a hot topic in our November webinar.

Jordan Roberts, battery raw materials analyst, remarked that by 2023 Fastmarkets expects mine supply to increase by 34% year on year to produce 972kt of lithium carbonate equivalent (LCE) and the majority of this will come from spodumene producers in Australia. It is forecast that significant supplies of lithium will come from new mines in China too, which will include spodumene brine and lepidolite.

Significant supply growth in the next ten years is also expected from South America and Africa, with Argentina expected to have a 6% share in the lithium market in 2023, increasing to 15% by 2030 and Africa a market share of 12 % by 2030.

Although currently, Europe is struggling to become self-sufficient on the mine supply side, it is expected that capacity will ramp up from 2025 in terms of third-party conversion capacity, with supply coming from the UK, Germany, France and Portugal, fuelled by spodumene units from Australia, North America, Brazil and Africa. North America is also expected to use a mixture of domestic resources and Australian ore to keep up with demand and, although China is diverting its attention to some of its domestic resources, it is expected that competition for spodumene units will remain strong, especially from the US and Canada due to the recent inflation reduction act (IRA).

3. Indonesian HPAL ramp ups may close the supply/demand gap

A significant supply response has recently arrived in the form of Chinese investment in the Indonesian High Pressure Acid Leach (HPAL) plants and is described by Will Adams as a ‘game changer’ for the future supply of cobalt and nickel.

Delays had been anticipated with the start-up of these plants, but supply is now reaching nameplate capacity much quicker than expected, with some projects designed to produce 15,000 tonnes per year of cobalt. Our view at Fastmarkets is that by 2032, Indonesian cobalt supplies could account for around 24% of global cobalt supply.

However, it is important to remain pragmatic about the success of these projects. While we have seen many of these HPAL units start up successfully, historically they have been plagued with delays and issues getting up to capacity. If this does happen in the future, we could see a reduction in the surplus and therefore prices for these battery materials such as cobalt climbing again. Matte plants are also extremely carbon intensive and these ESG concerns could push OEMS to reduce their exposure to cobalt.

4. New battery technology and charging infrastructure needed

New battery technology and an improved charging infrastructure have the ability to relieve pressure on the supply side of battery raw materials. ‘Range anxiety’ is really ‘charger anxiety’, and developing larger and larger battery packs in an age of constrained supply where global average trip distances are <15 km will result in a huge underutilization of precious battery metals. Muthu Krishna, battery manufacturing cost modeler, discussed the natural solution being a drive towards reduced pack sizes whilst focusing on improving cell energy density (Wh/kg), reducing metal intensity (kg/kWh) in the cell, and reducing non-cell mass in the pack through innovations such as cell-to-pack integration.

Lithium iron phosphate (LFP) cells are well suited to the demands of a smaller battery pack and will have an important role to play over the next ten years for the entry/standard range EV segments. LFP is cheaper, offers a higher cycle life than nickel, manganese, cobalt (NMC) batteries, can operate between wider states of charge, has better thermal stability and does not invite the same ESG concerns as the other chemistries as it contains zero nickel and cobalt.

However, if we are going to adopt smaller battery packs, we must consider redefining the charging infrastructure, which remains a ‘watch this space situation’.

Find out more about the possibility of expanding infrastructure in our special report, Stubborn battery costs are a speedbump to the EV revolution.

Furthermore, sophisticated anodes, such as silicon-rich anodes, have the potential to improve energy density whilst also shortening charging times. The increased use of silicon in anodes was also discussed by Amy Bennett, principal consultant – metals and mining, as she explored the possibility of this chemistry being adopted to reduce reliance on graphite intensity in current EV anodes. This in turn is expected to moderate current high price demands for graphite towards the end of our ten-year forecast period. However, with current and forecast demand, graphite prices are unlikely to return to levels seen historically.

5. Recycling will bring battery materials nearshore

Recycling is going to be a key source of supply over the coming years, and the EU and US have significant catching up to do with China, which already has well-developed partnerships and a market hungry for their recycled materials. However, this is set to change with the development of domestic gigafactories, localized refining plants and increased R&D investment in battery recycling, giving these regions an opportunity to catch up.

As reliance on this increasing secondary supply grows, dependency will decrease on imports of raw materials along with the exposure to long, complex supply chains and potential resource nationalism restrictions of other countries.

The last 18 months has seen battery recycling thrust into the spotlight and it will play a crucial part in achieving the circular economy we are all striving for in the next decade. Fastmarkets forecast that by 2032, scrap will make up 9% of the battery materials market. In the Fastmarkets NewGen Battery Recycling Outlook, we discuss how recycled material could impact the EV market and provide forecasts for available recycling scrap to 2032.

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Stay informed in this ever-changing landscape

Our webinar was recorded on November 15, 2022. As we know, these markets are volatile and the battery materials space is a dynamic market. To keep up to date with this fast-moving market and gain a strategic advantage, find out more about our Fastmarkets NewGen Forecasts and Fastmarkets NewGen Battery Recycling Outlook.

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