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Shortages flagged for EV materials lithium and cobalt

LONDON/HANOI: As the world moves to meet stringent targets for cutting carbon emissions: partly by phasing out internal-combustion-engine cars: demand for lithium, cobalt and nickel vital for electric vehicle batteries will soar, raising the prospect of shortages.

High lithium prices have failed to spur investment in new capacity due to lower long-term contract prices, while the problem for cobalt supply is that it is mainly a byproduct of copper, meaning investment decisions are based on copper prices.

For nickel, new projects in Indonesia, which has the world's largest reserves, mean the likelihood of major shortfalls may only come into play towards the end of this decade.

LITHIUM

Electric vehicle batteries can use lithium carbonate or lithium hydroxide, but the industry typically talks of lithium carbonate equivalent (LCE) which contains both.

Title: Lithium demand by sector, https://fingfx.thomsonreuters.com/gfx/ce/dgkvlnnjwvb/Lithiumper cent20demandper cent20byper cent20sector.PNG

LCE prices on the spot market have risen above US$12,000 a tonne, more than double the levels seen in November last year and the highest since January 2019, Benchmark Mineral Intelligence (BMI) says.

Title: Lithium carbonate equivalent prices, https://fingfx.thomsonreuters.com/gfx/ce/yxmvjaajgpr/Lithiumper cent20carbonateper cent20equivalentper cent20prices.PNG

Those levels are high enough to incentivise investment in new capacity, but annual or longer term contracts signed in the last quarter of 2020 with lower prices are a barrier.

BMI's George Miller forecasts a LCE deficit of 25,000 tonnes this year and expects to see acute deficits from 2022.

"Unless we see significant and imminent investment into large, commercially viable lithium deposits, these shortages will extend out to the end of the decade," Miller said.

Title: Lithium carbonate equivalent market balances, https://fingfx.thomsonreuters.com/gfx/ce/yzdvxmmanpx/Lithiumper cent20carbonateper cent20equivalentper cent20marketper cent20balances.PNG

The location of more than 60per cent of processing capacity in China is a concern as it could pose a risk to electric vehicle supply chains in the United States and Europe.

Title: Lithium supply China vs rest of world, https://fingfx.thomsonreuters.com/gfx/ce/jbyprggmnve/Lithiumper cent20supplyper cent20Chinaper cent20vsper cent20restper cent20ofper cent20world.PNG

Roskill's analysts estimate lithium carbonate equivalent demand will rise above two million tonnes by 2030, a more than 4.5 fold increase from 2020.

COBALT

Cobalt content in batteries has been cut significantly in recent years, but soaring sales of EVs mean demand for the minor metal is expected to rise overall, leaving deficits.

Analysts at Roskill forecast cobalt demand will rise to 270,000 tonnes by 2030 from 141,000 last year.

Title: Cobalt demand from electric vehicles as percent of total, https://fingfx.thomsonreuters.com/gfx/ce/xklvyawwkvg/Cobaltper cent20demandper cent20asper cent20percentper cent20ofper cent20whole.PNG

Indonesia's high pressure acid leach (HPAL) projects will help cover some of the shortfall.

But the problem remains that cobalt is mostly a byproduct.

"It's difficult to invest in cobalt specific capacity because it is a byproduct. There isn't a mechanism within which supply can react to demand and prices," said George Heppel, a consultant at CRU.

"If we look out to the mid-2020s, we could really do with another Katanga."

Glencore expects its Katanga mine in Democratic Republic of Congo to produce 30,000 tonnes of cobalt this year.

CRU forecasts cobalt demand from electric vehicles to account for more than 120,000 tonnes, or nearly 45per cent of the total, by 2025 compared with nearly 39,000 tonnes, or 27per cent, in 2020.

Title: Cobalt demand by end use, https://fingfx.thomsonreuters.com/gfx/ce/xegvbrddnvq/Cobaltper cent20demandper cent20byper cent20endper cent20use.PNG

The world's largest cobalt producer is the Democratic Republic of Congo, which is taking steps to develop controls and traceability of artisanal material to make it acceptable to those worried about human rights abuses.

Title: Cobalt mine supply by country, https://fingfx.thomsonreuters.com/gfx/ce/bdwvkxxzxpm/Cobaltper cent20mineper cent20supplyper cent20byper cent20country.PNG

NICKEL

Concerns about nickel supply for battery chemicals dissipated after Chinese nickel pig iron (NPI) producer Tsingshan Holding Group said it would convert NPI into matte, which can be used to make chemicals for batteries.

"There are now projects totaling 300,000 tonnes per annum to convert NPI into a product that can be turned into sulphate for batteries," Macquarie analyst Jim Lennon said.

"That nickel is on the verge of a surpercycle is hype. It will be over-supplied until at least the mid-2020s."

Lennon also expects Indonesia's high pressure acid leach (HPAL) projects to produce between 400,000-600,000 tonnes of nickel a year for much of this decade.

Title: Projected HPAL production by year to 2028, https://fingfx.thomsonreuters.com/gfx/ce/qmyvmzzanpr/Projectedper cent20HPALper cent20productionper cent20byper cent20yearper cent20toper cent202028.PNG

Global nickel supply is estimated at around 2.6 million tonnes this year. Of that about two-thirds will be used by stainless steel mills, most of them in China, while electric vehicles account for less than 10per cent of consumption.

Title: Nickel demand growth by first use, https://fingfx.thomsonreuters.com/gfx/ce/yxmvjaangpr/Nickelper cent20demandper cent20growthper cent20byper cent20firstper cent20use.PNG

Tsingshan said in March it would supply 100,000 tonnes of nickel matte to customers.

"There are other operators in Indonesia who could follow Tsingshan," said BoA Securities analyst Michael Widmer, who expcts NPI supply to contribute to surpluses in 2024 and 2025.

Title: New recycling techniques set to make electric vehicles greener , https://fingfx.thomsonreuters.com/gfx/ce/ygdvzxxmkvw/Nickelper cent20marketper cent20balances.PNG

(Reporting by Pratima Desai and Mai Nguyen; editing by Veronica Brown and Barbara Lewis)

Source: Reuters

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