The rush to strategic metals for battery production, which are key parts for electric vehicles, is raising fears of a global shortage. But is this justified? To read the US Goldman Sachs analysis led by Nicholas Snowdon, “Metal analysis of batteries: the end of the beginning,” this dark scenario must be softened. The report, which focuses on the lithium, cobalt and nickel markets, confirms that “The rally in the battery-powered metals market has peaked”.
Price decline in 2023
In terms of price, a ton of lithium should cost an average of $54,000 in 2022, while it was equal to about $6,000 in 2020. It should drop to $16,400 in 2023. This difference is explained by the acceleration of mining production driven by High prices and growing demand from car manufacturers. While the market was running a volume deficit of 11% in 2021, it should have a surplus of 25% by 2025.
A number of mining projects have been or will soon be launched around the world, particularly in China, Australia and Chile. Following the example of the French group Eramet, which produces nickel in New Caledonia and manganese in Gabon. It will start producing lithium in Argentina in early 2024, associated with Chinese steel group Tsingshan. It is considering operating new lithium production sites in Chile and Bolivia.
For nickel and cobalt, the situation is less exciting. For the latter, Goldman Sachs expects an average price of $78,500 per ton this year and $59,500 in 2023. On the other hand, nickel, which is supposed to be offered at $31,000 per ton in 2022, will remain stable at $30,250 in 2023. “Even if the price could reach $36,500 before it undergoes a downward correction at the end of the year.”says the report.
In terms of volume, from 2022 to 2025, Goldman Sachs expects an average annual increase of 33% for lithium supply, 14% for cobalt, and 8% for nickel, which will exceed their annual demand. 27%, 11% and 7%.
Battery demand is not cyclical
However, if “This phase of oversupply will allow for a superior cycle of battery materials in the second half of this decade.”the report confirms, on the other hand, during the same period, “Demand growth will be more structurally significant than supply growth.”, warns. In fact, the demand for metals for batteries will grow steadily, by 440% by 2030. “The demand for batteries is not cyclical, it is supported by strong political incentives and the rapid development of the electric vehicle market”US bank experts assure.
A warning aligns with that contained in the annual report on fleet electrification, published last month by the International Energy Agency (IEA). The International Energy Agency says that while sales of electric vehicles soar globally in 2021, the future availability of raw materials such as lithium is a concern. With 6.6 million units sold worldwide in 2021, half of them in China, electric vehicle sales doubled in one year, accounting for 10% of new vehicle sales. And in the first quarter of 2022, things accelerated even more, with 2 million units sold, or +75% within one year. These sales benefit from public subsidies, which doubled in 2021 to nearly €30 billion worldwide.
For car manufacturers, it is necessary to secure the supply of minerals for the production of batteries. Like Renault, which announced yesterday that it had signed a cobalt supply contract with the Moroccan mining group. The agreement provides for the annual delivery of 5,000 tons of cobalt sulfate starting in 2025 for a period of seven years. The diamond brand had already signed contracts for the supply of nickel with the Finnish group Terrafame, and lithium with the German company Vulcan Energy.
The price development of these metals is very important for auto manufacturers as the battery is the most expensive component of an electric vehicle. The cost of its production raises or lowers the final price of the car.
Low average price batteries
In its annual survey, published in November, BloombergNEF noted that “Lithium-ion model prices fell an average of 6% between 2020 and 2021 to settle at $132 per kilowatt-hour, while they were $1,200 per kilowatt-hour in 2010, down 89% in value but there are regional differences. : Average The price of a battery pack in China was $111 per kilowatt-hour, while it was 40% higher in the US and 60% higher in Europe.”
In fact, China has not only taken a step forward, but is also mastering the mineral markets. Europe produces a quarter of electric cars, but controls very few raw materials, just like the United States. “European and US governments have strongly pledged to develop battery production capabilities, but the majority of the supply chain is expected to remain Chinese until 2030,” Remember the IEA.