Fastmarkets battery raw materials market update

Key points

1. Current strategy misalignment
   Europe is planning for a nickel, cobalt, manganese (NCM) world in terms of cathode active materials (CAM) and gigafactories. However, our electric vehicle (EV) outlook and current trends suggest that Europe should be preparing for a more balanced world between NCM and lithium iron phosphate (LFP).

2. Affordability issues
   EVs in Europe are expensive and OEMs need to offer more affordable models. One way to achieve this is by adopting LFP batteries, a strategy already embraced by Tesla. How many others will follow suit?

3. Gigafactory developments
   ACC’s decision to pause work at two of its three gigafactories raises questions. Could they be shifting their focus towards LFP?

What do our analysts say?

The lithium value chain in Europe is still developing off the notion that nickel based chemistries will be the chemistry of choice in the region and therefore lithium hydroxide will be the dominant lithium chemical required. But what OEM announcements have shown us and what our EV sales forecast for Europe is displaying, is that LFP/LMFP is expected to have a 34% market share by 2034.

Jordan Roberts, Fastmarkets

Key points

1. SRB announcement
   Sentiment picked up following China’s State Reserve Bureau (SRB’s) announcement to buy 15,000 tonnes of cobalt, significantly higher than previous years (3,000 tonnes in 2020, 8,500 tonnes in 2023).

2. Oversupply
   This highlights the oversupply and ample availability following last year’s capacity increases in the DRC & Indonesia.

3. Temporary disruptions
   SRB purchases may temporarily disrupt Chinese exports later this year, but given the oversupply, price increases are not guaranteed.

What do our analysts say?

Following the SRBs announcement the seaborne cobalt metal market is expected to tighten in the second half of the year with less availability of Chinese material. Whether this transfers into a significant price recovery is unlikely given the scale of the oversupply upstream on cobalt intermediates.

Rob Searle, Fastmarkets

Key points

1. Price recovery
   Despite recent price falls, the LME nickel cash price has recovered well in 2024, up 12.7% after a 46% decline in 2023.

2. Supply cuts and uncertainty
   Production cuts and slower-than-expected issuance of Indonesian mining permits have supported the price recovery.

3. Revised surplus estimates
   The International Nickel Study Group revised its 2023 estimates, indicating a lesser market surplus than initially assessed.

What do our analysts say?

The recovery in the nickel price seen so far in 2024 has been supported by supply cuts, uncertainty surrounding Indonesian mine supply growth, and expectations of a restocking bounce in nickel usage in the battery supply chain. As a result, we now forecast a much smaller market surplus this year than previously expected. The nickel market has taken a big step towards rebalancing.

Olivier Masson, Fastmarkets

Key points

1. Supply disruptions
   Manganese prices have risen due to supply disruptions at South 32’s Gemco operation caused by cyclone damage.

2. Subdued demand
   While demand from pCAM buyers is subdued, disruptions in high-grade manganese ore supply are affecting sulfate producers.

3. Export delays
   Gemco will not be able to export until January 2025 at the earliest.

What do our analysts say?

Battery-grade manganese sulfate prices have risen 42% since the start of the year as a result of supply disruptions for high-grade ore out of Australia. Despite this, market participants remain wary of the ongoing weak buying from the NCM pCAM sector.

Fastmarkets

Key points

1. Supporting local production
   The US administration is supporting North American anode production by implementing a 25% tariff on Chinese anodes.

2. Diversification
   This will encourage diversification away from China and help build local anode capacity, essential for the US market once recent exemptions under the Inflation Reduction Act expire.

What do our analysts say?

The end of exclusions for natural and synthetic anodes under the Section 301 Tariff signals a clear intent to diversify anode supplies away from China. The 25% tariffs are essential for stimulating the development of a North American anode supply chain.

Georgi Georgiev, Fastmarkets

Key points

1. Demand priced increase
   Increased lithium demand is fully priced in as there is no shortage of supply.

2. Production increase
   China’s LCE production from lepidolite increased by 126% year-over-year in April, with spodumene increasing 109%.

3. Inventory accumulation
   Inventory accumulation suggests no shortage of supply, with time needed for demand to absorb the surplus.

Key points

1. Affordability challenges
   EV demand growth in Europe has slowed. With the first adopters having bought in, OEMs are finding it harder to sell due to affordability issues. EVs in Europe are more expensive than their internal combustion engine (ICE) equivalents.

2. Gigafactory rethink
   ACC’s decision to halt development at two European gigafactories implies a reconsideration of strategy. Will they adopt LFP technology, following the example set by China and Tesla?
   

What do our analysts say?

European OEMs have been slow to respond to the market demand for affordable cells and the shift to LFP. Chinese OEMs and Tesla recognized this long ago, understanding that the mass market will be unlocked by offering affordable vehicles.

Phoebe O’Hara, Fastmarkets