A forecast increase in demand for lithium, nickel or copper of at least 300%. What does this mean? | K&L Rock 1
K&L Rock Group / News / A forecast increase in demand for lithium, nickel or copper of at least 300%. What does this mean?

A forecast increase in demand for lithium, nickel or copper of at least 300%. What does this mean?

Published by: 16.07.2021 14:56:28

The prices of metal batteries are increasing rapidly. China dominates the battery chemical industry with the largest market share for all five major battery materials:lithium, nickel, manganese, cobalt and graphite. Diversifying the global supply chain would require significant investment from regions such as Europe and North America, according to research firm BloombergNEF.

Note: Demand for metals is estimated one year ahead of demand for batteries. All metals are expressed in tons, except lithium, which is in units of lithium carbonate equivalent (LCE)

Source: Bloomberg NEF

Main findings of the BloombergNEF study:

Battery demand will grow strongly this decade: By 2030, annual demand for lithium-ion batteries will exceed 2.7 TWh under BloombergNEF's economic transformation scenario. Total annual battery demand in 2030 is 35% higher than last year's outlook, mainly due to higher demand for passenger electric cars.

Sustained high metal prices could result in a significant shift in battery chemistry. Car makers could switch to lithium ferric phosphate (LFP) chemistry, which would reduce the performance of some EVs, especially their range. However, this would allow electrification of transport to continue unabated. In the LFP scenario, Bloomberg NEF increases the LFP share of stationary storage deployment in 2030 from 23% to 53% at a nickel price.

How will lithium fare?

Lithium shortage by 2025: Carbonate and hydroxide should be sufficiently supplied at least by 2025. Hydroxide could face shortages by 2027 as demand for high-nickel chemicals increases. One key risk is that around 35% of the projected growth in supply between now and 2025 will come from integrated spodumene to hydroxide converters in Australia. These projects are expensive and have had development delays in the past. If these Australian processors delay the commissioning of hydroxide, there could be a shortage in the market by 2025.

Lithium prices continued to rise in 2021 due to supply constraints from the pandemic and higher demand seen in China and Europe. Lithium prices rose 71% for carbonate, 91% for hydroxide and 58% for spodumene concentrate this year.

How is nickel doing?

Prices are likely to remain in the US$18,000 per metric tonne range. Earlier this year, BNEF predicted that the nickel market would move to a two-tier pricing system to further stimulate investment in additional nickel supply. As of the end of the first half of 2021, there have been no concrete developments toward a much-needed change in nickel market dynamics.

But what about cobalt?

A cobalt surplus is emerging. The cobalt market is likely to be in narrow surplus this year. Large and artisanal miners will produce approximately 166,434 tonnes of cobalt in 2021. Cobalt demand will reach 163,121 tonnes in 2021, leading to a surplus of 3,313 tonnes this year. This projected surplus will depend on the ability of artisanal producers to increase supply. However, the price of cobalt will hold. Cobalt prices are up 42% year-on-year on the London Metal Exchange. In March, the price rose to $53,000 a tonne. This is the highest price since March 2018 and 15% above the five-year average. The cobalt price could average $45,000 per tonne by the end of 2021. With the market forecast to be relatively oversupplied this decade, BloombergNEF expects prices to average $44,000 per tonne by 2025.

How will manganese fare?

South Africa's manganese production rose 208% year-on-year in April. The market has recovered strongly from the impact of Covid-19. Despite the resumption of mining operations in South Africa, the industry has been burdened by challenges related to transportation, electricity reliability and port operations.

Despite this, manganese sulphate prices rose 30%, from US$867 per metric tonne in January to US$1,128 in June, due to increased demand for batteries. Prices are likely to continue to rise in the second half of the year as demand for batteries is expected to increase. With the manganese sulphate market currently expected to be in deficit, prices are likely to rise to support new refinery projects.

But graphite?

Demand for graphite will grow. Demand for graphite from lithium-ion batteries is forecast to grow 37% year-on-year to 446,914 metric tonnes in 2021, BNEF estimates. It will grow 297% by the end of the decade. Commercial electric vehicles will represent the fastest growth, with year-on-year demand doubling in 2021. Overall, graphite demand for lithium-ion batteries will reach 446,914 tonnes in 2021.

Note: Metals demand is estimated one year ahead of battery demand. All metals are expressed in tonnes, except lithium, which is in units of lithium carbonate equivalent (LCE)

Source: Bloomberg NEF


All materials and information on the K&L Rock website are drawn from publicly available sources and are for informational purposes only. Every care has been taken in their creation. The information published on K&L Rock's website is in no way intended to be legal, tax or investment advice, analysis or suggestions or offers to buy or sell investment instruments, the implementation of which may result in the loss of all invested assets. The investment recommendations so indicated are for informational purposes only and are not binding. In no event shall K&L Rock be liable for any damages that may arise in connection therewith. Therefore, only use companies licensed by the CNB or with a valid permit to operate in the Czech Republic for trading in investment instruments.

K&L Rock also declares that it is not liable for any direct or indirect damage resulting from trading on the capital markets in general, and posts in discussions expressing the views of readers may not be in line with the operator's position and therefore cannot be regarded as its views.

How to start investing?