Battery Materials Market Update – April 2024

After years of exceptional growth from a low base, EV markets are beginning to mature and the record high prices in battery metals have disappeared, giving way to a more realistic market outlook.

Join our battery material experts as they explore what happens next in the electric vehicle and battery metals market. Has the market bottomed out yet or is there room for further deterioration? And what does a more mature market mean for electric vehicle batteries and the metals that make them?

Agenda

• Electric vehicle demand
• Battery chemistry changes
• Lithium prices: Bottoming out?
• The impact of battery recycling

Tom: Hello, and welcome, everyone to "Argus Metal Movers," an update on our new battery materials analytics product for the first half of 2024. My name's Tom Kavanagh. I'm the editor of "Argus Battery Materials." And I'm here with Mark Seddon, who runs our consulting division on metals, and he's gonna walk you through some of the new features and some of the assumptions under our new analytics product that we're releasing very, very soon. So, I think, with battery materials, it's always key to start with a conversation on electric vehicles, and I know that we've revised some of our forecasts a little bit on electric vehicles, so if you could walk us through what's changed over the last six months, and how we see the market now?

Mark: Sure. Yeah, so, I think we can probably say 2023 was a little bit of a down year for EVs. I mean, not in terms of sales. Sales obviously went up. But I think compared, when we compare it to 2022, I think the, kind of, the market, and on this, particularly on the supply side for battery materials, was quite kind of disappointed with the evolution of EV sales in 2023. So, in China, for example, 2022 EV sales grew by 100%. So, doubled, effectively. Whereas in 2023, they were still up 30%, which, you know, in a normal market would be a good number, but obviously, well below 2022. The U.S. actually did, U.S. and North America, did quite well. And so, I think sales in the U.S. were up by over 50%. So, that was a good year for the U.S., but Europe was probably the laggard in terms of EV sales. So, overall, EV sales actually dropped in Europe, slightly, by about 5% or so, just under, which is, yeah, compared to, you know, the growth rates that we've been seeing previously, was a disappointment.

And it was really mainly sales of plug-in hybrids. So, full-battery electric vehicle sales in Europe were up, but plug-in hybrids sales were quite, were well down, compared to... So, that's kind of colored our forecasts, particularly in the shorter term, so, this year and next. So, it slowed it down a little bit. I think if we look over the longer term, we're probably getting to roughly similar figures for global sales by 2030...2034, sorry. So, we have a, like, a 10-year forecast period in the analytics. So, we're forecasting global EV sales to reach about 47, 46...sorry, 46 million units by 2034. And I think in the previous, it was probably a little bit higher than that, maybe 48, closer to 50. And a lot of that's probably in Europe. So, Europe sales, in our forecast, is a bit lower. So, we've got average growth of about 12% per year for Europe. If we compare that with North America, North America, the average over the forecast period is more like 16%. So, we'll probably see America, or North America, overtake Europe in the early 2030s, I guess, or late this decade, early 2030s. And then, by the time we get to 2034, they'll probably have roughly similar shares of the market, global market. So, I think U.S. would be, or North America would be about 21% of the market, and Europe 20%.

China, I think, you know, in terms of the forecast for China, they're a little bit easier, because the Chinese have fairly set targets for their EV sales, EV penetration, and they've actually already met the previous targets, so they've readjusted. So, we've got good growth in China, and then obviously, that'll start to plateau as we get towards the end of the decade, because they'll have basically hit their targets, and they'll be at the correct volumes of EV sales. So, you can see on the chart, you can see the overall EV growth, split between full-battery electric vehicles and plug-in hybrids, and you can see that full-battery electric vehicles take over more and more as we go further forward. So, plug-in hybrids start to sort of, not disappear, but they'll become a smaller part of the market. And then if you look at it in terms of the regions, you can see that China is obviously still gonna be the main region for EV sales, and so on.

Tom: With that, I mean, it's all well and good having these increasing sales, but in terms of their impact on battery materials, a lot of that has to do with the chemistry of the battery, right? So, how will the growth in the different regions shake out in terms of battery chemistry?

Mark: So, yeah, here, there's a big split, really, between China and the rest of the world. You can probably see from the chart, the red bars are LFP and LMO chemistries. And you can see, if you look at the global picture, there's obviously still quite a big chunk is LFP/LMO, and that's really down to China. So, China is pretty much betting the house on LFP technology. They've been driving that. And as you can see, as we go forward, it pretty much becomes an LFP-dominated market in China. That's not to say they're not producing the other chemistries, because obviously, they're supplying, you know, global manufacturers at the moment, with the nickel chemistries, but in terms of the domestic market, it's pretty much an LFP-dominated market.

Tom: What makes China so well-suited to LFP batteries?

Mark: I think it's mainly a cost issue. So, LFP batteries are a cheaper option. I mean, if you look at the chemistry, it has less energy density, so, in theory, you get less range for the same volume of battery. You obviously need more batteries to give the same range as if you compare it to a high-nickel chemistry. So, yes, it's more of a cost, I guess, in that sense, and they kind of looked at it, you know, if you look at it compared to, say, Europe, for example, I mean there is LFP technology, and it will have a share of the market, but it probably doesn't get to more than, I guess, 25%, 20%, 25% percent in our forecast period. And that's mainly because in Europe, people look at LFP batteries as, as I say, the cheaper option, lower range. So, it's really focused on the, I guess, the budget sector. So, city cars, with lower range, where you can, you know, charge them up more regularly. Also, in the cheaper models. Whereas in China, they pretty much look to LFP across the board. I mean, you can see the difference with Tesla. So, the Tesla that's produced, the Model 3 that's produced in Shanghai uses an LFP battery, whereas the Model 3 produced in the States uses a nickel-based chemistry. So, you can see that there's definitely a big regional difference.

So, I think, you know, going forward, we can kind of assume that China will keep on the path, on the LFP side, whereas if we look at it in Europe, specifically, actually, Europe, they're looking at high-manganese batteries. So, that's where you'll see the sort of difference. So, the use of the nickel chemistries is falling as we go forward, and, but in Europe, it's being replaced more with the high-manganese rather than LFP, so... The U.S. at the moment is still really focused on the nickel-based chemistries, and we don't see that changing too much, so you can see, in the rest of the world, which is mostly made up of North America, the high-nickel chemistries still dominate as we go through the forecast period. LFP does grow, and the high-manganese do, but not to the same extent as Europe, I guess.

Tom: And I know in the analytics products, we also model quite a lot of the future recycling in this market, which is due to play an increased role. What can recycling do to fill supply gaps in this market, or even overtake primary supply? Because I know that it's, in cobalt, for example, we have quite a different forecast, when it comes to battery recycling.

Mark: Yeah. So, this is one of the more interesting, I guess one of the more interesting areas. We're still at early days in terms of the recycling, so the technology, you know, there's quite a few startups and so on, companies looking at recycling batteries, the chemistries and the technologies involved. I mean, one of the complicated things is the different chemistries that are available. So, at the moment, it's quite difficult to just lump everything together and recycle it that way. So, you kind of have to sort out whether you've got nickel-based chemistries, LFP, and so on. Then you've got the commercial, the kind of commercial realities of recycling. So, at the moment, it's not really commercially viable to recycle an LFP battery, because the, you know, the prices of the materials in LFP batteries is not high enough when you compare it to the nickel-based chemistries, which have nickel-cobalt. But I think, as we go forward, you're gonna see that change, because there'll be some kind of regulation, whether it be subsidies, or, you know, forcing companies to recycle LFP batteries, which will then have an effect on the price of the recycled material, or the black mass.

So, we've kind of tried to take that into account in our modeling, and there is quite a big difference, really, between when you look at the different battery materials. So, as you mentioned, cobalt, and cobalt is the one where there is going to be, or, in theory, there could be a significant amount of cobalt available from recycling. Partly, that's down to the chemistries, and partly down to the change in chemistries as well. So, when EVs become available for recycling, which is in, sort of, 8 to 10 years' time, the early ones are using a lot more cobalt, so that when they come to be recycled, then they provide a lot more cobalt. So, if you look at the cobalt situation, by the time we get to the early 2030s, 2034, as much as 40% of cobalt demand could be supplied with recycled material. If you compare that to nickel, for example, the same chart, it's less than 20%. And then lithium, somewhere in between. So, it does make a big difference in terms of the market that you're looking at. So, the cobalt market should be well-supplied with secondary material, nickel less so, and lithium's kind of somewhere in the middle.

Tom: And if we move on to primary lithium, I know that's kind of the battery material that's been on everyone's lips, and everyone has their take on where the price goes, and the reaction to the shorting of the market over the last few months. What's our take on the lithium price and where it's going at the moment?

Mark: Yeah. So, it's, yeah, it hasn't been a great market if you're looking at the, sort of, price for lithium. So, we've seen, I mean, effectively, lithium prices have lost 80% of their value over about a year or so, which is a hefty, yeah, hefty drop. It does appear as though we've kind of bottomed out, but it's always very difficult to pick the bottom of the market, but I think, in terms of our shorter-term forecasts, I think we're kind of at the bottom now. Prices have stabilized at their levels for a little while. And I think we're not really seeing huge amount of improvement over the year, but I think there should be an improvement in prices as we go forward, and that might accelerate towards the end of the year, as we've kind of, you know, we've moved the oversupply situation a little bit. You know, we've seen some projects maybe delayed a little bit. You know, because obviously, if you've got a project to produce lithium, it was obviously looking a lot more optimistic with prices over $80 a kilo, or up to $60 a kilo or whatever it might be. So, the situation is slightly different when they're at $20 or below.

But I think, so, as we go forward, we'll also we'll hopefully see a little bit more of an improvement on the economic side, so, particularly in Europe, for example, we'd expect to see an improvement in EV sales and so on. I mean to be fair, EV sales in January in Europe were up 30%, so it seems to have started the year quite well. And we would expect that to continue in through the year. So, we're hoping to see a little bit of an improvement in prices, and it may be that that accelerates towards the end of the year.

Tom: Yeah, I know that we've been working to put some extra data and figures into this new analytics publication. Could you highlight some of the things that we've been working on over the past six months, that will be coming out in this most recent publication?

Mark: Sure. So, I mean, we've been obviously working on all of the different battery materials, from lithium on. We've been doing quite a bit of research on the nickel supply side, which is kind of an interesting area. There's been, you know, quite an increase in nickel production in Indonesia, for example, and they're kind of looking at the dual market, so, nickel is still dominated by the stainless steel industry. But the battery side of things is gaining importance, so suppliers of nickel are starting to look at both areas. On the cobalt side, again, we've been looking at the supply side, but it's been particularly interesting on the recycling, and the recycling modeling. So, that's kind of what's really kind of changed on the cobalt. And then on manganese and graphite, we've actually introduced longer-term price forecasts. So, in the previous edition, we just had the short-term 12 month forecast for graphite and manganese, and now, in this new edition, we've got the 10-year forecast. So, that's kind of, we're hopefully adding into the data on that side of things.

Tom: Well, thanks, Mark. I think that's all that we've got time for. All that data and more is available in the Battery Materials Analytics product, which comes with the Argus Battery Materials service, and that's available now on the Argus website, so, yeah. Check it out, and join us again in the next "Metal Movers" podcast. Thanks for listening.