European Battery Raw Materials Conference 2022 – ten things we learned

Key talking points among delegates at Fastmarkets’ Battery Raw Materials conference in Barcelona, Spain, September 20-21

1. ‘Black mass’ dominated conversations

The battery industry was maturing in Europe, and with battery and cathode active material capacity being announced, focus within the industry was turning to the circularity of raw material supply, particularly for those materials in which Europe is resource-poor, such as nickel and cobalt.

Although the circularity of sourcing has become a key discussion point for the market, there were still significant discussions around the pricing of black mass – processed battery material to be recycled.

At present, black mass was priced on a payables basis per the contained content of the material. But there were increasing calls for transparency in this market, with producers and consumers seeking to secure supply.

Battery producers were watching developing markets in Asia for opportunities for recycling and the procurement of older batteries.

2. New markets rely on pricing transparency to grow

Markets that were expected to grow in the coming decade - such as recycled batteries, nickel-mixed hydroxide precipitate (MHP) and manganese sulfate - all needed further pricing transparency to justify and attract more investment.

Industries such as battery recycling, although still in its relative infancy, lacked the reliable pricing mechanisms and transparency needed to show investors pricing trends and give them the confidence to invest in new projects, conference attendees heard.

New derivatives, such as the Singapore Exchange’s new suite of battery raw material contracts, underpinned by Fastmarkets’ lithium and cobalt prices, and existing derivative products on the London Metal Exchange and Chicago Mercantile Exchange sought to help provide a forward curve to bring more investors into those markets.

Two price charts side by side showing price volatility in cobalt and lithium markets as a way to showcase the need for hedging price risks

>> If you’re looking to find out more about risk management solutions including futures contracts for cobalt and lithium, click here.

3. Commoditization key to development of graphite industry

Further standardization of the graphite market was required if the sector was to develop the transparency it needed to attract greater financing, according to participants on a graphite market panel.

The need was particularly clear downstream, where clearly understood specifications for spherical graphite were still required.

Index pricing would further aid the commoditization and development of the market.

4. Regulations, insufficient investment threaten raw material supply

Regulation was one of the key roadblocks to getting Europe the raw materials needed for it to meet its decarbonization goals, market participants said. Examples ranged from the proposal by the European Chemical Agency (ECHA) to classify lithium as a toxin, to various lithium mine delays stemming from strict regulatory processes.

Market participants also said that a lack of clarity on the form of future environmental guidelines for processing battery raw materials made it difficult to give investors the clarity they needed to allocate capital.

5. Europe faces lithium shortage in meeting BEV targets

Europe had the capacity to become a global powerhouse in the battery electric vehicle (BEV) and gigafactory sectors, but lithium availability would be the biggest obstacle, according to Sam Adham, LMC Automotive’s senior powertrain research analyst.

A graphic showing the difference in supply and demand for the US and Europe in 2032

While the BEV market develops, there will be a shift toward lithium iron phosphate (LFP) batteries in Europe, as has occurred in China, according to LMC.

LFP chemistries are less expensive than lithium-ion batteries and are suitable for a move toward smaller vehicles.

>> Read more about the Fastmarkets NewGen Battery Cost Model here.

6. Questions remain about how lithium-ion batteries will take off

Throughout the conference, the question dominating conversations was how to facilitate the shift to lithium-ion batteries.

With significant investment in the downstream side of the supply chain, attention was on how the upstream market could keep pace with demand, or how demand could adapt to work within the constraints of the supply of critical raw materials.

With original equipment manufacturers (OEMs) now employing raw material experts to lead procurement strategies, and producers calling on regulators to assist them in beginning production, it was now clear that the market would need to work together to meet the challenge of the green energy transition.

7. Focus builds on nickel intermediaries

Nickel-rich chemistries such as NMC (nickel, manganese, cobalt) were seen as the ones which would provide the lion’s share of Li-ion battery cathodes. As a result, focus was building within the industry on the sustainable supply of nickel intermediaries to feed battery-grade nickel sulfate production globally.

One intermediary product which was dominating conversations was MHP (mixed hydroxide-precipitate), which was now seen as the key to reliable nickel sulfate production.

Fastmarkets has proposed the launch of an MHP price, basis cif China-Japan-Korea, and welcomes any feedback on the proposed specifications.

8. Sharper focus on ESG needs to be developed

A shift from short-term gains to the long-term benefits of acting with high sustainability and social credentials was essential to creating an environmental, social and corporate governance (ESG) mindset in the electric vehicles (EV) battery sector.

Sources at the conference agreed that education was needed to embed ESG in businesses across the EV battery value chain, and that a holistic approach was needed in the transition to a greener economy.

9. Strong community relationships needed to grow supply chain

The importance of fostering good relationships with local communities and helping to develop a skilled local workforce in mining regions was agreed by participants at the conference.

In particular, mining in Europe was key to reducing the over-dependence on other regions for raw materials, and would need the facilitation of mining as well as fostering relationships with local communities.

10. Future EV battery chemistry remains unknown

Nickel, lithium and cobalt prices have reached record highs due to tight supply and strong demand from the EV sector, and this has helped stoke debate on how EV battery chemistries could shift and evolve in coming years.

But how those chemistries will shift was relatively unpredictable, especially beyond 2030.

“There’s lots of news constantly about a new fantastic cell chemistry, a new system,” Fastmarkets research analyst Muthu Krishna said in a panel on September 21. “It’s one thing to create something in the lab on a very small scale. But to be able to scale that up and then also mass produce it at the rates that OEMs require them, that’s a completely different ballpark and a lot of chemistry. A lot of new technologies fall at that hurdle.”

If you’d like to learn more about the challenges and opportunities ahead for the battery materials market, head to our dedicated battery materials page. This includes the latest news and market analysis, as well as more information on Fastmarkets NewGen price data, forecasts, risk management and other products to help you navigate this new energy reality.

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