Key takeaways from the Fastmarkets BRM global outlook webinar

We look at some key predictions for the battery materials market from our recent global outlook webinar. Register to access the webinar recording for free

Our Fastmarkets experts took a deep dive on some of the current hot topics in the battery materials in a recent webinar. Read on for key insights or watch the on-demand webinar now:
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  • Lithium-ion battery demand remains strong, with a focus on energy storage
  • Lithium prices are starting to recover and lithium demand remains tight
  • The cobalt market has seen a weak first half of the year but will recover
  • A nickel oversupply is expected due to new Indonesian supply
  • There is a diversification with natural and synthetic graphite sources
  • Developing smaller, energy-dense battery packs will preserve key battery materials
  • The recycling market continues to grow with end-of-life scrap taking over from production by 2031

1. Lithium-ion battery demand remains strong, boosted by demand from energy storage

Fastmarkets is expecting demand for over 9 million tonnes of key battery materials by 2033. Broken down by metal type, this is around 3.5 millon tonnes of lithium, three million tonnes of graphite, two million tonnes of nickel and 400 000 tonnes of cobalt. The electric vehicle (EV) sector will remain the dominant source for batteries over the next decade, representing 80-85% of demand. In 2033, energy storage systems (ESS) are expected to represent 11% and consumer electronics 4%. We expect consumer electronic battery demand to remain fairly flat as the technology is now commonplace and replacements are few and far between. Fastmarkets predicts continual growth and demand from the EV sector; battery electric vehicles (BEVs) will remain the dominant source, representing 60% of battery demand by 2033.

The sector that really can’t be ignored is the ESS market. Due to the widespread rollout of ESS-related legislation in the US, China, Europe and India, we are seeing the installation of lithium-ion batteries in ESS expand at a higher rate year-on-year than EV sales – ESS installations expanded by over 100% in most markets in 2022. As a result, Fastmarkets forecasts ESS gigawatt-hour battery demand to grow with a compound annual growth rate (CAGR) of 18% over the next decade.

2. Lithium market will remain tight and disconnected from the cost curve

Since the all-time high lithium price of 85 dollars per kilogram in November 2022, lithium prices fell over 60% across the board from the start of the year to the lows witnessed in April. As predicted, the bottoming out of prices in April ignited a price rebound, fuelled by restocking by lithium-ion phosphate (LFP) car manufacturers, increasing utilization rates and a return of positive sentiment. The domestic Chinese carbonate price has recovered to 310,000 yuan per tonne, an increase of 88%.

In terms of supply and demand over the next two years, not much is expected to change in the status quo. China already represents 65% of refined production and it is expected that 69% of new process supply coming online between 2022 and 2024 will be based in China.

If we look at demand, demand is forecast to increase by 28% year on year in 2023, with a 24% increase year on year in 2024. EVs are set to represent 74% of this growth. The main region commanding demand will be China, but Europe and the US may also gain ground.

The lithium market is predicted to remain in deficit this year and next. Although demand in the first quarter was relatively weak, robust demand year on year is still expected. Continued price volatility will still be felt, which may see the lithium price move above and below the average annual forecast.

3. Cobalt will continue to be in short-term surplus but outlook is bullish in the long-term

Hopes were pinned on the cobalt market seeing a strong recovery in the first quarter of 2023 but this has been muted. There was some support, restocking and trader activity in March but, overall, the start of 2023 has seen weak demand and bearish sentiment.

However, the overall view from the Fastmarkets cobalt long-term forecast is that Western preference for higher energy density nickel manganese cobalt (NMC) vehicles and high-performance vehicles will drive cobalt demand over the next ten years. The sheer volume of unit sales growth for cobalt-containing EVs will continue to support demand through 2033, where the EV market will make up 60% of total cobalt demand. The requirement for restocking is expected to support prices in the second half of the year. For now, the cobalt market is expected to remain in a surplus in the coming years and begin to tighten around the middle of the decade.

On the supply side, the key takeaway from last year is that mined cobalt supply reached almost 200,000 tonnes, which was a record increase of 23% (36,000 tonnes). Major increases came from the democratic republic of Congo (DRC) and Indonesia. Cobalt hydroxide from the DRC in 2023 and 2024 and from mixed hydroxide precipitate (MHP) in Indonesia will lead to further major production additions in the coming years. Indonesia became the second-largest producing nation in 2022. Over the course of the forecast, this is expected to increase to 23% of the total cobalt supply. These capacity and mined supply additions lead us to forecast a cobalt supply surplus in the short-term.

4. Nickel oversupply driven by Indonesian production growth

In the near-term, on the nickel demand side, the market has seen a change in the main driver of growth. In the past decade, the stainless steel industry has driven an increase in primary nickel consumption. However, the battery sector is now expected to be a significant driver of demand, due to the increased adoption of EVs. As a result, the battery industry, which accounted for only 12% of primary nickel demand in 2022, will see that share of demand rise to 24% by 2025.

It is Class 2 production that has been the catalyst for primary nickel production growth and that is mainly produced in China and Indonesia. Going forward, the main category for the growth in nickel supply is going to be predominantly nickel sulfate, again to feed the growth in the battery industry.

Although Fastmarkets expects strong growth in Class 2 materials production, most of this production will also come from Indonesia and China, with Chinese sulfate production fed by Indonesian material.

Looking at the market balance in the next couple of years, the nickel market will be well supplied up to 2025. Fastmarkets predicts a nickel market in surplus, with the nickel price coming under some pressure this year and in the following years.

5. Competition between natural and synthetic graphite sources

Graphite prices have moved largely in line with the other battery materials over the past year. Pricing momentum slowed in the second half of last year as natural graphite supply issues were resolved and spherical graphite, the natural active anode material precursor, faced competition from synthetic graphite.

Graphite flake prices have not fallen as significantly as spherical graphite prices in recent months. This highlights the impact of competition from synthetic graphite material on demand for natural graphite active anode material, as well as the fact that spherical graphite does not have a diversified demand base and is dependent on demand from the battery sector. Despite the fact that graphite flake prices have held up better than spherical prices, there have been some production cuts in both China and Africa in response to the lull in the market.

There are numerous projects in the pipeline to increase natural and synthetic graphite production over the coming years. Graphite supply is highly concentrated in China. There is a definite need for diversification and localization of graphite supply.

In summary, there is a current graphite surplus but this is expected to shift towards deficit by the end of 2023. While synthetic graphite production may be ample, a shortfall on the natural graphite side may result as new projects face delays. In the longer term, Fastmarkets expects to see new capacity hitting the market at a more rapid pace towards the end of 2025. The outlook for graphite prices remains bullish, reflecting phenomenal growth from the EV sector.

6. Average battery pack costs could reach 100 dollars per kilowatt hour

Overall, cell costs have come down since peaking in March 2022. NCM 811 is the most expensive of the cathode active materials (CAMs). However, its high energy density means that it is actually cheaper from an energy density basis per kilowatt hour.

By inputting data from the Fastmarkets long-term forecasts for lithium, nickel, cobalt and graphite to the Fastmarkets Battery Cost Index, we can calculate with today’s cell technology how much overall cell costs will be in the years to come. For the NCM 811 cell, it is estimated to be 78 dollars per kilowatt hour. This is expected to be reached in 2027 at the earliest. Cell costs are predicted to initially come down, with the NCM 811 chemistry potentially falling to 68 dollars per kilowatt hour by 2029. Beyond this point, there is a risk of constrained supply pushing costs back up. To mitigate potential supply crunches, it is crucial to develop more energy-dense cells with lower material intensities and improve manufacturing and recycling processes. It is also critical not to oversize the pack and under-utilize precious battery raw materials.

Lithium iron phosphate (LFP) is more firmly stable than NCM 811 and has a higher cost target to achieve 100-kilowatt hours on the pack level. The cost cell target for LFP is estimated to be 83 dollars per kilowatt hour, which is expected to be achieved by 2025. Until now, LFP was widely deployed in China but is now being used more globally by car manufacturers, including Ford and Tesla. It will play a large part in electrifying transportation, as well as for use in stationary storage applications around the world. It would not be a surprise to see the 100 dollars per kilowatt-hour target being achieved sooner.

7. Recycling market will continue to grow but still only represents 5% of battery metal supply

One current challenge for recyclers is the lack of scrap battery feedstock. This causes shredders to run at reduced capacity and eats into profit margins. Currently, the main source of scrap is production scrap, which accounts for roughly 70% of all scrap. End-of-life scrap makes up for approximately 30%. By 2033 we expect production scrap to constitute 40% and end-of-life 60%. Fastmarkets expects the turning point to come around 2031, where end-of-life scrap takes over as the main source.

Black mass, the name given to the remains of a lithium-ion battery pack after shredding and some processing, is currently priced on its nickel and cobalt content in most markets outside of China. In Asia, the payables given are typically higher than other regions, which reflects the fact that lithium recovery rates are also higher there.

Black mass is usually priced on nickel and cobalt content. Before battery raw materials prices started dropping sharply in the first quarter of 2023, the black mass market was seeing roughly 70-100% payables for nickel and cobalt depending on metal content and battery type. Currently, levels are around 55-85% depending on metal content and type. Fastmarkets expects this to recover when battery metal prices also move higher.

Of the total cobalt supply that has already entered that market, as well as that expected in 2023, we predict roughly 5% will be from battery recycling. In terms of tonnage, that is around 15,000 tonnes of secondary cobalt. By 2033, Fastmarkets expects this to be around 64,000 tonnes, representing 12%.

For lithium carbonate equivalent (LCE), this sits at 57,000 tonnes of secondary LCE in 2023 and by 2033 this is predicted to increase to 238,000 tonnes – increasing from roughly 6% of the market to about 7% of the market. For nickel, in 2023 it is thought 62,000 tonnes of secondary recycled nickel will be from battery recycling and by 2033, 259,000 tonnes. That represents a jump of 1% to 5% of total primary nickel production.

In May 2023, Fastmarkets launched weekly payable indicators for NCM black mass for the cif South Korea market – which are the world’s first seaborne black mass prices.

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