Interview with Paul Lusty, head of battery raw materials at Fastmarkets | Fast Forward podcast episode 2 transcript

You can read the full transcript of our interview between Andrea Hotter and Paul Lusty for Fast Forward podcast below. Or, listen to Fast Forward podcast on Spotify, Apple Podcasts, Amazon Music or wherever you get your podcasts.

Full episode transcript

Andrea Hotter [AH]: Welcome to Fast Forward, a podcast by Fastmarkets. I’m Andrea Hotter, special correspondent at Fastmarkets. And throughout this series, my colleagues and I are going to be discussing some of the key issues impacting the critical minerals that are powering the world’s energy transition.

Last time we looked at regulation and policy, and today we’re going to be discussing some of the key issues impacting lithium, nickel, cobalt, and other key materials used in the production of batteries for electric vehicles.

To do this, I’m joined by Paul Lusty, who is the head of battery raw materials at Fastmarkets. Welcome to the podcast, Paul.

Paul Lusty [PL]: Hi, Andrea. Great to be here.

AH: Thank you for joining us. So, Paul I have to say I did a little bit of research, which I prefer not to call internet stalking and I discovered that you’re actually a geologist by background and spent a significant portion of your career at the British Geological Survey. You held the roles of economic geologist, as well as head of critical raw materials there.

And you were also the person responsible for designing, establishing and delivering the UK Critical Minerals Intelligence Center for the UK government, which you then served as a director of. So, I think it’s pretty safe to say that you’re very well grounded in these markets from a practical supply demand perspective. And you also have a pretty decent knowledge of what governments are trying to achieve.

PL: Absolutely, yeah. I’ve worked in minerals and mining for the last 20 years or so. Very much started at the sharp end of the industry working in mineral exploration and mining before moving to the British Geological Survey, where I held various roles, more than a decade as Head of Critical Raw Materials Research, so covering many of the value chains that we research at Fastmarkets.

But then as you say, moving into the position of Director of the new UK Government Critical Minerals Intelligence Center, so a huge amount of work working with policy makers, they’re trying to improve the resilience of critical mineral supply chains into the UK market. Obviously, a lot of engagement with international governments around collaboration on supply chain resilience. So yeah, a fair amount of background in this topic.

AH: Fantastic. Well, it’s very impressive. So I think, well, let’s just And I think the best place to start is with lithium. Now, if you’ve been following the lithium markets, then I think you’ll agree that the expression rollercoaster ride is extremely appropriate.

I admit I’m not a fan massively of roller coasters as I tend to get motion sickness. So, if you’re anything like me, it’s fast and very exciting on the way up and dramatic and a bit scary on the way down. I’ve heard lots of theories to describe the price moves. What’s yours? What happened?

PL: So I think the rollercoaster analogy is absolutely correct. When we look at the lithium price charts for the last couple of years or so, we saw that really rally where lithium carbonate and hydroxide prices hit over $80 a kilogram in November and December 2022. We then saw that very major price correction in a 2023. And then really, we’ve seen this almost year-long slight slump in prices to where they sit now in this 13 to 15 kilogram per dollar range.

So, a crash of more than 80 percent since the end of 2022 is really significant for any market. But I think it’s also useful to put it in perspective in terms of where prices were. Because we are no doubt in this very weak patch, but we still haven’t reached those very low prices of less than 7 a kilo that we saw back in 2019 and 2020.

Where we are currently with prices, they’re certainly low enough to cause producers pain. A number of companies have embarked on major cost cutting reviews. There’s been deferrals of capital investment in the industry. So that really is leading to this slowdown that we’re seeing in ex China supply chain development.

AH: There’s a lot to unpack there. I mean, I guess one of the questions is, there seems to be a little bit more optimism now that the market has bottomed and that things are starting to turn around a little. Do you think we’re at an inflection point and we’re starting to see the green shoots of recovery now, or I guess using that same rollercoaster analogy, is it time to stop and get off?

PL: Well, we believe the market, the lithium market specifically, but this is probably true of many of the battery raw materials does lack a bit of direction currently. But we do think we are probably starting to see a few positive signals that probably will lead to some price upside in coming months.

The first of those is the strengthening of the spodumene prices. They’re up 40 percent from the sort of 800 to 900 per tonne range, which we saw in February. So, a reasonable improvement there. And that’s going be very supportive in our view for chemical salt prices later in the year. I think the second piece of positive news is that the Chinese government have recently put out a new automotive policy, which is aimed at boosting consumption in China, which is clearly the key global market for battery raw materials.

And that’s caused a bit of a rally in Chinese lithium futures prices. And then something else that we’ve been watching and observing is the installation volumes in the Chinese market. This is installation of batteries during March, which has helped to improve sentiment there. I think we’ve seen a 70 percent month on month and 40 percent year on year increase in battery installations in March 2024. So, very positive. And then I think the final piece of the story really relates to the role of stocking and de stocking cycles, which has been a prevalent driver of volatility in the lithium market over the last 18 months or so. We’ve seen this very significant and aggressive de stocking into the price fall of 2023, but that the stocking can naturally only go on for so long before consumers really do need to go back to the market for new material. And we’ve done some analysis around stocks in the Chinese market. And we understand that since January 2023, producers, particularly in the CAM part of the value chain have destocked around 70,000 tons of lithium carbon equivalent.

So, this represents quite a significant fall from where we were in January 2023 down to about two months of inventory at the CAM stage of the value chain in China. I think all of these indications lead to us to believe there might be some support to salt prices over the coming months naturally because of the length of the value chain in China.

Improved performance at the battery or CAM manufacturing stage will naturally take quite a while to flow upstream and impact salt prices. So, it might be even the final quarter of 2024 before we actually see the impact of that increased demand in the salts market.

AH: Yeah. It does definitely sound like there were a few reasons to be cheerful and I think the destocking one is really important. Do you think the market is just immature and that we’ll see these cycles, for want of a better word, become less extreme as the markets develop over time?

PL: I think you’re absolutely right. Many of the battery raw materials, but particularly the lithium market is fairly immature and we will see obvious maturity in the market. We’ll see more liquidity coming into the market, we’ll see more suppliers and diversity of sources of supply in the market. So I think with time, these spikes in demand or destocking will naturally have less impact on price. And hopefully in the next five to 10 year period, we’ll certainly see the volatility, which has been quite extreme within the lithium market starting to subside.

AH: What does all of this do for incentivizing projects? I mean, you mentioned it already. We’ve seen a number of projects be either deferred or on hold. Also, when prices fall, you typically start to see exploration dry up and you certainly see the appetite to provide financing start to contract.

PL: Absolutely. And I think as you alluded to often, the first thing that goes in the mining industry is exploration when we see low prices it’s not just battery raw materials, but the mining industry as a whole is known for these boom to bust cycles. But definitely, this sort of low price environment that we’re seeing across the battery raw materials currently is absolutely meaning that particularly western developers are looking to defer capital investments, which will naturally lead to a potential slowdown and risk to building out those also important ex China supply chains.

AH: And obviously we talked a little bit ex China there, but incentive prices also have big implications for China and Chinese lepidolite production. A little while back, I think everyone was slightly astonished at the pace of growth in lepidolite production, not just in Zimbabwe and Namibia, but also particularly in China. And then we started to get reports of Chinese capacity being shut down. Now, a lot of those mines sit at the top end of the cost curve, which means lepidolite production was more than economically justified when prices were around five times higher a year ago. Now, not so much. So, what’s your take on the growth in lepidolite production?

PL: Yeah, so Chinese lepidolite is a major source of supply, and it’s more than doubled in the past two years, and it’s the largest source of mined lithium supply in China last year. As you indicated, lepidolite production in China very much sits towards the top end of the industry cost curve.

So, these operations must be really feeling the pinch at current carbonate prices. I think there are a lot of people questioning why more lepidolite production hasn’t been taken offline given that high cost of production and really what must be negative margins for many producers in China.

I think the first production that we’d expect to see disappear from supplying units into the market is non-integrated production, as integrated operations have got this natural built in cost advantage. But at current prices, even integrated low grade and high cost operations should also be dropping out of the picture.

I think though, sometimes there’s slightly irrational behaviour in the Chinese market, it’s very likely that some unprofitable capacity is being kept online due to the long-term strategic importance of these lithium resources for Chinese consumers. It also gives Chinese consumers of carbonate an alternative sources of supply to the international market.

I think also when you look at the structure of the industry in China, a lot of efficiencies come through that integrated nature of the market.

We also, I suppose, know that manufacturers like a consistent source of feedstock for battery manufacturing.

I think there’s a lot of reasons currently why that Chinese supply really remains so sticky, but it is surprising that where prices are haven’t deterred more growth in Chinese lepidolite.

AH: Yeah, for sure. There’s always that aspect of how far is the Chinese government willing to go to support the capacity.

Now let’s move on to electric vehicles. The pace of electric vehicle sales has certainly slowed. I was at the New York Auto Forum recently, and two of the common threads running through the conversations were range anxiety and cost. So, my question is. Is the EV sales outlook as doom and gloom as we’re being led to believe?

PL: I think you’re very right to point out that we’ve seen a slowdown in really what would truly exceptional EV sales growth rates of 2021 and 2022. I think back in 2021 we were looking at annual year on year sales growth of in excess of 100 percent which was really phenomenal. And the slowdown in sales growth that we’ve seen in 2022, but also in 2023, I think we dropped to about a year-on-year growth rate of about 36 percent in 2023 has certainly led some commentators to suggest that the EV market is running out of momentum and facing some fundamental challenges.

We don’t really subscribe to that narrative. We very much, at Fastmarkets, feel they’re on a steady upwards trajectory over the next decade, but they will grow slower and what you might describe as probably more sustainable a year-on-year growth rates than what we were seeing back in 2021 and 2022.

What you’re seeing playout in the market currently is a reflection of a host of different regional or even country based challenges that you’re seeing in different markets. I think the overall growth story remains intact. It’s only going to be natural that those countries like China and Norway that had extremely high growth rates two or three years ago and have significant levels of EV penetration, those markets are increasingly being saturated, so over time that growth will slow.

Sales in Europe and the U. S. have also been below levels of expectation. Interest rates have a big role to play in terms of buying decisions, particularly when the industry is focused around vehicle financing.

And that can play quite a pivotal role in consumer decision making. What we do see though is some very strong growth in some of the developing emerging economies, in the Asia Pacific region, that have really experienced very exceptional levels of growth. Places like Thailand, nearly 500 percent year on year growth in the last year or so.

And these are countries where it’s important to recognize that there’s very strong government policies and incentives that are pushing the adoption. So, I think in terms of the regions we’re watching, certainly the Asia Pacific region is seeing really high levels of growth currently.

AH: And what about plug in hybrid electric vehicles? I know quite a few people who have been buying them thinking, “I’m not quite ready to go fully electric, but I might get around some of the range anxiety and the cost as well if I can buy a plugin.” Is that being reflected in the sales or just people that I know?

PL: You’re absolutely right to point it out because that’s been an interesting development in the last year or so. Plug in hybrid EV sales have been rising at a stronger rate in the U S and China compared to full electric vehicles. And we do really think that trend is going to continue, particularly in China, going back to this point I made earlier with regards to saturation in the market.

That saturation is really primarily in the largest sort of tier one cities. So, as you try and push EV adoption into rural areas or less developed parts of the countries where there’s less well established EV charging infrastructure, plug in hybrids really make a lot of sense until that infrastructure is in place.

I think in the US it seems obvious that plug in hybrid probably hit the middle ground for many buyers who aren’t ready to move to a fully electric vehicle, or they just think it’s too big a jump in one go and don’t want to completely part with ICE vehicles. I think range anxiety is still a concern, he US seems to put a lot of emphasis on their ability to travel long distances on a single charge, do weekend getaways, driving vacations and that sort of things, or confronting some of the issues for electric vehicles around freezing weather. I think that is a challenge for perception in the US. So, you can understand why some of these issues with consumer sentiment persist in that market.

Whilst there is a lot of discussion around range anxiety and the need for bigger battery packs in the US market, it is slightly questionable as to whether that really stands up to scrutiny given many journeys in the US, the average journey length is still less than 50 kilometers. So almost all electric vehicles will permit that.

So again, I think it’s a public perception thing as much as anything.

AH: Yeah. Definitely a transitional period on the hybrid side. And let’s just touch briefly also on Chinese EV sales growth, which had started to plateau and we weren’t seeing the hundred percent year on year growth rates that we previously did.

But things definitely did pick up in, April, however, how do sales volumes and feature growth look like to you?

PL: We’re not expecting to see those phenomenal levels of growth that you probably expect to see in a market like China during that early adoption phase.

I think if you visit any Chinese city, most people are surprised by the number of electric vehicles on the streets is a huge contrast with Europe and North America. The charging infrastructure is in place and that’s a major factor for consumer decision making, having the confidence in the fast-charging infrastructure.

And in any country where we’ve seen established fast charging networks like China or Norway that has very much been that catalyst for mass adoption of electric vehicles. Chinese vehicles are relatively cheap. Electric vehicles in China, certainly smaller ones are certainly almost on parity with electric vehicles if not as cheap as any internal combustion and there’s huge amount of choice in terms of electric vehicles for consumers in the Chinese market. So, that bodes very well for continued sales growth, albeit at a lower rate in the Chinese market.

AH: Okay. Well, look, let’s dig a little bit into the battery chemistry side. They are constantly evolving. Sometimes it’s hard to keep up. Obviously, they vary depending on the region. What’s the winning chemistry right now? Talk me through what you’re seeing.

PL: One of the key factors for consumers, besides charging infrastructure that we consider to be a major hurdle for mass adoption currently is the affordability of electric vehicles, particularly in markets outside China.

Battery chemistry and options around chemistry has a major role to play in terms of improving affordability. But coming back to specifically what we’re seeing in the market over the last sort of 12 months or so, it’s been very interesting to watch resurgence in interest in certain NCM chemistries. LFP has certainly increased in demand over the last year, but we’ve also seen this return to focus on some of the more affordable cell chemistry, such as 622 and 523. And that’s very much a function of lower battery raw material prices. So there’s less incentive to thrift some of those more expensive battery raw materials like cobalt.

Aside from NMP, demand remains strong, and we’re currently forecasting that it will peak with about a 40 percent share of the EV market in 2027. Obviously, watching with interest how much traction LFP is a relatively low cost chemistry and you can get in the European market and potentially even in the US.

I think a really interesting development and something that we’ve only done recently included in our chemistry forecast is the inclusion of LMFP. And we’ve started to focus on that because of the rapid developments that we’re seeing in LMFP cell production and commitments from OEMs to utilize that chemistry.

So, we’re currently forecasting that LMFP will take about 17 percent of the passenger EV market in 2034. It’s got benefits over LMFP in terms of the higher energy density while maintaining similar costs and safety levels. So that’s a positive development, particularly I think for mid-range electric vehicles.

AH: Yeah, we’re talking about manganese there obviously it’d be interesting to see what the greatest demand driver for manganese will be eventually whether it’s the NCM batteries, or the LMFP, who knows, down the line.

PL: Absolutely, no, it’d be interesting to watch. And then, of course, there’s sodium ion, which there’s a lot of talk and interest about.

It’s got characteristics that are similar to LFP, but I think it really arrived on the scene because of the high cost of lithium that we were seeing back in 2022 and some of the other battery raw materials. So while we’ve got relatively low lithium prices, there’s relatively little incentives for the sort of commercialization in sodium ion chemistries currently.

We forecast currently the sodium ion will only take about 4 percent of the battery market in 2034.

AH: And that includes energy storage as well, I assume?

PL: Yeah, that’s across energy storage as well. On the horizon, you get these quite regular announcements now around what is the potential role of solid state batteries.

Toyota has quite recently made another announcement on, solid state, some of the claims sort of 750 miles range and 10 minute fast charging do sound phenomenal really, given, when you compare those to existing lithium ion chemistry.

So it is a potential game changer technology, but we do still believe there are quite a few sort of technical and manufacturing challenges to overcome before true solid state batteries can be commercialized and adopted on a mass scale. So I think it’s one to watch with interest.

AH: Watch this space. Okay, we can’t avoid talking about regulation, even if we’d all like to whether it’s the US Inflation Reduction Act, or the EU Critical Minerals Act, or a plethora of other initiatives around the world, governments are trying to protect and diversify supply chains on both national security and criticality of minerals grounds.

Part of this has definitely included a desire to reduce reliance on one or two dominant suppliers, very often China. So my question, Paul, is how realistic is it that the West manages to reduce its reliance on China for key raw materials, as well as maybe chemicals, batteries, and who knows, maybe even cars? Can the West ever decouple supply chains?

PL: I think the short answer is no, they are really going to struggle given such a dominance that the Chinese economy has built in this space over the last couple of decades, if not longer. There’s not going to be a quick fix here.

I think there are obviously lots of policy and regulatory changes that are trying to incentivize regionalization of supply chain. The US very decisively moved away from their dependence on electronics from Chinese suppliers.

That’s primarily driven by national security concerns. Canada has forced Chinese companies to de invest from stakes in lithium projects. And countries like the UK are also looking at this very closely. They’ve put in measures such as the National Security Investment Act, which gives the government powers to identify and intervene in entities and assets that are potential risks to the UK economy.

Probably the most significant piece of regulation is the Inflation Reduction Act or the IRA in the United States. It’s hugely significant in the context of on shoring supplies chains, but also driving domestic investment in clean energy. So we’re seeing a lot of investment flooding into the US. But I think what it’s particularly important for policymakers to understand is it takes a lot of time to build capacity and resilience in an economy. In the interim, if you’re looking to countries like Korea and Japan to supply batteries, for example, into the US economy also is going to take them a lot of time to establish compliant supply chains.

Graphite is one of those battery raw materials that really exemplifies some of the challenges that Western consumers face in terms of trying to move away from Chinese supply chains.

Virtually all natural anodes have to be produced or processed in China at some point. So when you think about that in the context of supply into the US market, and particularly in the light of the foreign entity concerns or FEO regulations that are coming into effect in 2025 for critical minerals, but also minerals used to produce batteries. Based on our current analysis, no EVs will be eligible for the 30D tax credits in 2025 because of that lack of ability to procure anodes that aren’t manufactured in China.

it’s going to take a long time to shift our dependence on the Chinese market and these long and complex supply chains that have been built over the last decade or so.

AH: For sure, it’s going to take a lot of pragmatism. I am very glad you brought up the Foreign Entity of Concern because that’s obviously the rule that says the company has more than 25 percent ownership by a nation like China it doesn’t get those IRA tax credits.

When you get to Indonesia, which produces about 60 percent of the world’s nickel, which most of the smelting operations there have a Chinese shareholder, that has a pretty important impact, right?

PL: Absolutely. Indonesia has built up this incredibly dominant position over the last few years in the nickel market supported in a significant way by growth in the Chinese steel industry and Chinese investment in Indonesia. So, the Foreign Entity of Concern regulation is quite problematic for countries like Indonesia as they look to diversify away from China in terms of the range of nickel products that they’re selling into the market, but also the countries that they’re supplying to.

There are some western companies active in the nickel industry. In Indonesia, companies like PT Vale, Nickel Industries. There are also some major project owned by the Indonesian government, but the majority of the larger projects in the country have more than this 25 percent Chinese ownership.

The Indonesians are looking very closely at this issue. Obviously  corporate restructuring to get below that 25 percent is one way to come within the FEOC regulations, but it’s going to be interesting to see how that plays out. I think the challenge is slightly compounded for Indonesia because it also still doesn’t have a free trade agreement with the US as well.

And that’s going to be very important in the context of regulation because new EV tax credits available through the IRA requires those batteries to be built with at least 40 percent of the value of those minerals coming from the US or a country that has a free trade agreement with the US.

AH: The thing is when Indonesia is 60 percent plus and rising of the nickel market, where else do you go that isn’t already committed to energy? Look, I know we’re kind of running out of time, but I do want to touch very briefly on the cobalt market because as a by-product of nickel in many instances, the growth in Indonesian nickel has had a knock-on impact on the cobalt market too, right?

PL: Absolutely. So that rapid expansion of the Indonesian nickel industry, particularly the ramp up of high pressure acid leaching or HPAL plants and what they produce, MHP, means that Indonesia emerged as a very significant by product cobalt producer.

It’s the second largest producer in the world now, accounting for about 8 percent of global cobalt production, still well behind the DRC, but significant in terms of the global supply picture. A lot of the weak price that we’ve seen in the cobalt markets over the last couple of years is very much because of lower than expected demand, but that production growth that we’ve seen in Indonesia, but also DRC for that matter, has undoubtedly played quite a big role, certainly in terms of the market surplus that we’re currently seeing for cobalt.

AH: Yeah, these are all such fascinating discussions and conversations. And we’ve got our big lithium and battery raw materials event coming up in Las Vegas on June the 24th to the 27th, which is going to be a great event. Please, I hope the audience joins us there. You can find out more details on the Fastmarkets website.

But ahead of that, I always like to ask what the market is ignoring, that it should be looking at. What might we be talking about at that conference that we aren’t necessarily looking at right now?

PL: Looking forward, we think the impact of the low price environment that we’re currently seeing is really going to be felt further down the road. We’re going to push some of the supply challenges into the next decade across the battery raw materials after 2028 or 2029.

We’re forecasting most of these markets to move into deficit and then that’s a really worsen into the next decade. The low price environment that we’re currently in is just not going to incentivize the necessary project development currently to service those forecast deficits.

Particularly for policymakers, it’s very important that although we’re in a current situation of having ample supply in these markets that these bearish prices, the general weak market sentiment is really starting to bite in terms of deterring your investment. So we’re seeing that slow down in project development that could really hinder the build out of ex China supply chains.

A natural follow on from that in the context of the low price environment, is we really shouldn’t underestimate the response from China. It was very much on course, if not still is in a position to dominate global EV and battery production, which represents a risk to the automotive industries in the US and Europe. But with the financing challenges confronting many of the projects, the Chinese may well be happy to step in, see an opportunity in the current price environment.

Clearly in some jurisdictions, the US, Canada, they’re not going to be able to do that. But there are plenty of projects in places like Africa and South America, where you might expect to see more funding flooding in in the absence of Western investment.

AH: Yeah, and a lot of that feeds into my next question, I guess, If we had to fast forward 10 years, what does the battery raw materials or critical minerals landscape look like?

PL: Well, that’s quite a challenging question given how quickly these markets are evolving, but also the sort of number of tensions and cross winds at play.

I think in terms of batteries, lithium iron is definitely here to stay. Annual demands only going to increase. I think that’s supported by the huge amounts of investment that we’ve seen in lithium ion, some of the lock in effect, but also the maturity of the supply chains.

In terms of performance, I’m not convinced we’re going to see any really radical changes in the performance of lithium ion batteries, but rather incremental improvements.

One also important change that we’ll see in a decade or so’s time and we see increasing importance now is the role of recycling, but also circular economy in battery raw material markets. So, over that time horizon and in the very near future, regulations including targets like minimum recycled content being able to evidence better performance of the supply chain, but also security of supply considerations is also going to significantly drive an uptake in recycled content of batteries. So, that’s an interesting thing to watch. And then coming back to one of your earlier questions, questions really in terms of whether we’re going to see reduced volatility in these markets as they mature.

I think as market liquidity and volumes grow, and you also get a greater range of players and processing technologies and routes supplying into the market, then these small changes in demand growth or the stocking and de stocking cycles will have a less of an impact on market balances and prices as the market matures.

Something we’re also going to see develop over the next few years is what is the potential for regional premiums, whether they be related to IRA compliance supply, but also what are the opportunities for green premiums and pricing mechanisms to reflect green or low carbon materials within battery raw material markets. So, I think that’s another space that the industry should be watching.

AH: And now, let’s take a quick break from the interview to hear from one of our in-house experts hear at Fastmarkets:

Fleur Ritzema [FR]: Thanks, Andrea. Hi, everyone. My name is Fleur Ritzema, and I am the director of non-ferrous pricing and editorial at Fastmarkets. Paul mentions the increasing role of Indonesia in the cobalt market, and this is something we’re really monitoring very closely within the pricing team at Fastmarkets. The speed of supplies has actually come as a bit of a surprise to many in the cobalt market. As Paul mentions, it comes in a low cobalt price near-term environment.

This is adding greatly to that oversupply and especially on the chemical side, which is keeping prices across the board really quite subdued in cobalt. So the new supply joining the market from Indonesia is of course amplifying that. We’ve got increased metal production from China, increased supplies leaving the DRC, which of course is then often going to China to feed that metal production and in the backdrop, we have this expected EV sales growth lower than had been anticipated. In early May, the Fastmarkets benchmark cobalt price, which is on a Rotterdam Europe basis, as well as those Chinese metal prices dropped to eight-year lows.

And of course, China is central to this story. China’s domestic cobalt metal supply is expected to reach 32,000 tonnes in 2024. That’s up from 21,000 tonnes in 2023, and these are figures from the Fastmarkets analyst team. Now that’s a really big increase, mainly due to several Chinese metal producers planning to expand cobalt production in response to the surging availability of raw material supplies of cobalt hydroxide, according to the producer sources we speak to. These new supplies of Chinese metal are, again, something we watch really closely, and we have moved to include some of these new producers in our pricing processes and are looking into others of these.

Now with Chinese growth as it is and add in the MHP or mixed hydroxide precipitate, which is the chemical form of nickel cobalt coming from Indonesia, those units are exacerbating this excess supply in cobalt that will typically be flowing towards the battery markets.

We’re being told that the MHP being produced in Indonesia is really well suited as it’s a product in great proportions as a mix for battery production. And it comes from low cost of production too. So as long as the nickel price works for MHP production, then that expansion will keep occurring that impacts the cobalt market.

Now looking ahead there are of course really big ambitions within Indonesia. Indonesia went from being an ore exporter to a refiner, they are also now steel producers. On the battery side they are currently a refiner and increasingly they also have nickel sulphate production lines. There’s historically been no actual battery manufacturing. But this looks set to arrive soon. Indonesia clearly wants to not just be mining and refining. The Apple CEO, Tim Cook, was in Jakarta in April and reportedly spoke to the president about building an Apple plant in the country. The government has also been in direct discussions with multiple global brands around the potential to build battery cell production capacity in the country, including with Tesla, although no formal commitments have been made.

So, we can certainly assume that the country has these aspirations to grow and sell globally, which is why we need to keep a close eye on developments here.

AH: And now, back to the interview. Before we finish, Paul, we’ve gathered some questions from people within the audience of the battery raw materials sector. And I just wanted to pose a couple of those to you before I let you go.

So, the first question we had is what are the most significant challenges and advancements in sustainable extraction and processing of battery raw materials? What are the tough parts and where’s the industry making positive strides?

PL: Because of the association between battery raw materials and clean, green energy, there’s going to be a huge amount of scrutiny of the performance of battery raw material supply chain. The industry is doing a lot of work in this area, but there’s a lot of work still to be done looking at how we reduce the carbon intensity of actual raw material production.

Water usage is a major challenge many parts of the world. Going back to places like Indonesia, when you’re mining relatively low grade ore deposits, tailings management is a big challenge, but also impact on local communities. So I think there’s a lot of work to be done, particularly as the industries start to establish themselves in new jurisdictions, particularly Europe and North America.

There’s a lot of work around the social license to operate and convincing local communities of the importance of mineral extraction. So those are all sort of challenges for the industry to tackle.

AH: And a question here on the production of nickel matte. I know this is a big one, but maybe if you can just summarize it, has the production of nickel matte been feeding into battery production as was widely anticipated?

PL: Yes, so nickel matte is an important intermediate product that can be converted from nickel pig iron that has become an important feed for nickel sulfate producers in China to supply the battery sector. The data is quite complex around the raw material mix that’s going into Chinese refineries.

But we know that some of the Indonesian matte that’s going into China is not being used for full plate cathode production. So we very much assume that it’s going into sulfate market in China.

AH: And the final question, and then we’ll let you let you off. Have you seen any niobium or exotic rare earths being used by the OEMs?

PL: To be honest, we don’t hear a lot of discussions about those materials in the context of talking to the supply chain and particularly battery manufacturers and OEMs. Niobium is an interesting metal.

It certainly is of interest for batteries. It’s been used as a sort of dopant or coating material in some new cathodes that are being developed. I’m not sure they’re commercialized yet. And niobium again, you can understand why the listener has mentioned this. Because, it’s potentially got important applications in anode materials in terms of allowing them to emit faster charging operated at wider range of temperatures.

So we understand that the battery industry is looking at some of these additives to enhance battery performance in conventional batteries.

AH: Great. Well, Paul, it’s been so good to talk to you today. I know we could dig deeper into all of the markets and topics we covered. So maybe we’ll get you back another time and draw on your knowledge at a later stage. So, thank you very much.

PL: Yeah, thanks, Andrea. It’s great to speak to you. It’s a huge topic, so yeah, something we will continue to explore.

AH: And thank you to the audience also for joining us today. In order not to miss any more episodes, make sure you subscribe to Fast Forward on Spotify, Apple Podcasts, Amazon Music or wherever you get your podcasts. And don’t forget to leave us a review.