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Discussions around the need to secure domestic supply of key raw materials to meet international decarbonization efforts and to align with environmental, social and governance (ESG) were heightened following the initial lockdowns and logistics challenges that emerged from the outbreak of Covid-19 and throughout 2020.
But with more cathode active material facilities and battery manufacturing plants planned, companies and countries are looking to localize supply and production where possible, these discussions have taken on a new urgency – particularly following recent legislation in the United States where battery components will need to be made or assembled in the US.
This potentially throws up significant challenges for regions such as Europe and North America where supply of raw materials such as nickel, cobalt and manganese are not abundant, increasing reliability on other nations such as Indonesia.
“Everyone wants domestic supply of raw materials at the moment, but you can’t change where [mineral] deposits are,” one nickel miner told Fastmarkets.
“You’ve just got to take what’s there,” one consumer said.
While localization remains a focus for many western nations, regulations and legislation – to meet lofty decarbonization goals – in Western nations on new battery raw materials projects continue to cap supply of metals such as lithium.
In Europe, the Barroso lithium project in Portugal is facing a legal claim in its latest set of hurdles facing the project. New mining rules introduced by the government there last year gives local authorities more power over permitting new projects in the country.
Rio Tinto will conduct an internal feasibility study for its Jadar mine in Serbia after the Anglo-American miner’s exploration license for the project was revoked following protests.
Market participants in the region also continue to watch a pending ruling on whether lithium hydroxide, carbonate and chloride will be classified as toxic. If it becomes law, it could hinder Europe’s ambitions to become carbon-neutral by 2050.
To meet global demand, new supply of 200,000-300,000 tonnes per year of lithium – between two and eight new projects – is required every year, producer SQM said at the Lithium Supply and Battery Raw Materials conference in June.
Fastmarkets’ research team forecasts the deficit of lithium to grow to 60,000 tonnes lithium carbonate equivalent (LCE) in 2022 and to 89,000 tonnes in 2023 – despite processed lithium supply jumping to 883,000 tonnes LCE from 693,000 tonnes in the same comparison.
With heightened focus on localization of supply chains globally, regional developments are causing price gaps to widen in key raw material products. One growing trend is that metals such as nickel and cobalt being valued at a higher price by western consumers than their Asian counterparts.
Regional price gaps have widened, with Covid-19-related lockdowns damaging demand in Asia while demand in Western nations remains strong. As well, complicated freight rates are making arbitrage opportunities in the two regions difficult to exploit in recent months.
In response, some price ranges have widened. Fastmarkets assessed cobalt standard grade, in-whs Rotterdam at $24.50-25.65 per lb on August 25, with market participants claiming there is still material available on an ex-works or in-whs basis in China at around $22-24 per lb in recent days.
The gap was visible in nickel prices where briquette, a refined metal that can be dissolved into battery-grade nickel sulfate, is traded $675 per tonne higher in Europe than in China.
The focus on localization has also led to a increase in value of certain brands of battery raw materials due to their alignment to certain ESG requirements, while devaluing others for their lack of that alignment.
Supply tightness, expected increases in electric vehicle (EV) demand over the next few years and a focus on ESG mean that consumers such as automakers are focusing on long-term solutions to secure supply through strategic partnerships and off-take deals with producers and traders.
US automakers General Motors (GM) and Ford throughout the past quarter have focused on securing long-term supply to meet their EV production targets.
New US legislation incentivizing EV demand is also spurring scrutiny and transparency on issues such as material origins. As a result, downstream consumers are also looking for ways to further their control their supply chains.
Manganese, a key raw material for nickel-cobalt-manganese (NCM) batteries, is also gaining attention. Since Fastmarkets started tracking manganese sulfate 32% Mn min, battery grade, exw Mainland China in March, the price has dropped by more than 34%. In the most recent trial pricing session, Fastmarkets assessed manganese sulfate at 6,200-6,500 yuan per tonne on Thursday August 25, down from 9,000-10,000 yuan per tonne in March 17.
Market participants have told Fastmarkets that competition in the market is heating up, with some looking to aggressively establish market share after prices fell throughout the first half of the year due to the damaging impact on demand from Covid-19 lockdowns.
Conversations on graphite will focus on the expected market shift from currently weak demand, especially in Europe, and a shift into deficit.
The rise in demand for spherical graphite is likely to drive the move while the energy transition process develops. The anticipated surge in demand for graphite for anodes should accelerate the need for fine flake from China and around the world.
On the demand side, producers from Africa will increasingly grow their share in the global market, while downstream producers continue to emerge.
In the short term, prices have been static or softening since a surge over much of 2021 and the start of 2022. Fastmarkets assessed graphite spherical 99.95% C, 15 microns, fob China at $3,100-3,300 per tonne on Thursday, flat since July 21.
One potentially viable method of localizing supply chains regionally and supporting this trifurcation of the market is through the recovery of raw materials from the recycling of lithium-ion batteries.
Significant investments into recycling capacity globally include companies such as Glencore looking to sign strategic offtake agreements for the supply of black mass, the recycled content of cathodes, which could provide a domestic supply route for nickel and cobalt.
While many in the market believe that there is a distinct need for global standardization of black mass for it develop into a widely traded product, the continued drive for sustainable domestic supply of key raw materials could lend support to future growth in this space.
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