Battery raw materials market update August 2024

Key points

1. Challenges for Western producers
   Current lithium market conditions and the near-term lithium price outlook are creating significant challenges for Western producers, as reflected in their quarterly results, operational reviews, cost-cutting measures and the scaling back of expansion plans.

2. Oversupplied market
   The bearish sentiment has intensified due to an oversupplied market, with no indications of production cuts in China and continued weak demand during the summer months. Battery production is projected to remain flat or experience only a slight increase in August.

3. Brine production peak levels
   Substantial imports of lithium carbonate into China persist, even as domestic brine production reaches peak levels.

What do our analysts say?

With spot lithium prices in China plummeting to a three-year low, dragging down Asian markets, integrated producers are facing mounting cost pressures, while non-integrated producers may find themselves operating at a loss. At this price point, we are well into the cost curve, compelling more significant production cuts in the coming months to rebalance the market and mitigate further losses.

Fastmarkets

Key points

1. Further pressure on downstream
   Production results from CMOC indicate further pressure on downstream refined products in the second half of 2024.

2. CMOC production growth
   CMOC produced 55,000 tonnes of cobalt in H1 2024, up 178% year-on-year, with mined production growth tracking bullish copper prices in H1 2024. 

3. Glencore production down
   Glencore, the world’s second largest cobalt producer, reported half year production of 15,900 of cobalt, down 27%.

What do our analysts say?

The first half of 2024 has seen a similar trend emerging with Chinese-backed mining assets continuing to press ahead with production increases while Western miners took a more cautious approach. With copper prices expected to remain at current levels through the second half of the year Fastmarkets expect to see a persistent oversupply in the cobalt intermediates market.

Fastmarkets

Key points

1. LME price decline
   The LME price has declined once more from its peak in May, even with additional production cuts being announced. 

2. Fundamentals point to oversupplied market
   The LME nickel cash price had recovered from last year’s rout, reaching a peak in May. The recovery was supported by announced production cuts earlier this year (mainly FeNi smelters and concentrate producers) and worries that Indonesian mining permits (RKAB) were being issued more slowly than expected. However, the fundamentals still point to an oversupplied market. 

3. BHP suspends Nickel West operation
   BHP has announced that its Nickel West operation in Australia will be suspended starting October. This will remove some IRA-compliant class 1 nickel and nickel sulfate from the market. BHP will review the decision by February 2027. 

What do our analysts say?

The production cuts announced this year have stabilized the nickel price and contributed to a recovery. However, with the fundamentals still indicating an oversupplied market, prices have begun to decline once again. Additional announcements of production cuts have not been effective in halting the recent price drop, resulting in a 0.9% decrease in the LME nickel cash price on a year-to-date basis.

Fastmarkets

Key points

1. Downstream demand sluggish
   In July, prices for battery-grade manganese sulfate remained stable, as demand from the downstream NCM pCAM sector continued to be sluggish. 

2. Chinese buying slow
   Orders from Chinese buyers were slow heading into the summer lull period with many players uncertain of when the recovery in demand will come. 

3. Supply disruptions keep prices elevated
   High-grade manganese ore prices remained elevated, up 9% month-over-month, due to ongoing supply disruptions in Australia. 

What do our analysts say?

The upward momentum in battery-grade manganese sulfate prices slowed in July as orders and NCM pCAM production remained below expectations. Buyers remain cautious of restocking before seeing a clear recovery in demand.

Fastmarkets

Key points

1. Chinese graphite prices bottom
   After 17 consecutive months of decline, Chinese flake graphite prices reached a bottom in July. 

2. Destocking and production costs
   While any graphite price improvement will be modest in the final months of the year, we suspect the combination of an end to destocking and the pressure of underlying production costs will keep prices from further significant reductions over our short-term forecast period. 

3. Prices may see further gains
   Fastmarkets maintains the view that graphite prices may post additional gains in Q4 2024 on seasonal demand increases and production outages. 

What do our analysts say?

Fastmarkets has downgraded natural graphite price forecasts for 2025, reflecting continued intense competition from synthetic graphite, with further capacity additions coming online in China and the likelihood of price cutting as producers seek to gain market share. We do not see graphite prices returning to 2022 levels over the 2024-2025 period.

Fastmarkets

Key points

1. Malaysian import crackdown
   Since June, Malaysia has implemented a crackdown on the import of scrap batteries and black mass in compliance with the Basel Convention, a treaty designed to prevent the transfer of waste from developed to developing countries. 

2. Capacity for battery recycling
   We estimate capacity for at least 24,000 tonnes of recycling from scrap batteries to black mass and then to a partially refined product such as MHP or metal salts in Malaysia this year.

3. Price fall following lower demand
   Fastmarkets cif Southeast Asia NCM, NCA payables fell 5% over the last two months and the inferred price fell 12% to $3,150 due to lower demand for metals from CAM and cell production and oversupply of primary (i.e. mined) metals. 

What do our analysts say?

Malaysia no longer importing scrap batteries and black mass due to a crackdown associated with the Basel-convention. Previously, Malaysia imported feedstock from the US and producing MHP to sell to China. Malaysia accounts for 31% of the 2024 operational shredding capacity we are aware of for Southeast Asia. We expect this will present a challenge for Chinese MHP buyers but a potential opportunity for other Southeast Asian countries to fill the gap.

Fastmarkets