The second episode of the Fast Forward podcast delves into the dynamic landscape of battery raw materials (BRM) and explores the key factors affecting lithium, graphite, nickel and other critical minerals. Our speakers also touch on regulatory and supply chain challenges, battery chemistry trends and global electric vehicle (EV) markets.
Hosted by Andrea Hotter, the episode features Paul Lusty, Head of Battery Raw Materials Research at Fastmarkets.
Key points covered in the discussion include:
- The state of the lithium market
- The outlook for global EV sales and the growth of plug-in hybrid electric vehicles
- The latest EV battery chemistry trends and preferences
- Challenges in reducing dependence on Chinese supply chains
- Factors to keep a close eye on in the BRM markets
Listen to the full episode and subscribe to Fastmarkets’ Fast Forward podcast on Spotify, Apple Podcasts, Amazon Music or other podcast providers today.
What is the state of the lithium market?
Lithium markets experienced a large price spike in late 2022, followed by a correction in 2023 that resulted in an 80% drop in lithium prices. This decline has prompted manufacturers to cut costs and delay investment, particularly affecting supply chain development outside China.
While the lithium market currently lacks direction, we are starting to see positive signals that could lead to higher prices in the coming months:
- Strong spodumene prices: Spodumene prices are up 40% from the 800-900 per tonne range seen in February, which is expected to support chemical salt prices later in the year
- New Chinese Auto Policy: The Chinese government has introduced a policy to increase consumption in China, which led to an increase in lithium prices in the future
- Battery Installations Growth in China: Battery installations in March 2024 were up 70% month-on-month and up 40% year-on-year
- Dismantling cycle coming to an end: Analysis shows that since the 2023 price crash, Chinese producers have destocked about 70,000 tonnes of lithium carbonate equivalent. This trend cannot continue indefinitely and consumers will eventually have to go back to the market for new materials
The lithium market is expected to mature over time, resulting in increased liquidity, more suppliers and diverse sources. As the market stabilizes, fluctuations in demand will have less impact on prices and volatility should decrease over the next five to ten years.
What is the outlook for EV sales?
Electric vehicle sales growth rates have slowed since the exceptional growth rates of 2021 and 2022, falling to a 36% year-over-year growth rate in 2023 from over 100% in 2021.
Some commentators suggest that the electric vehicle market is losing momentum, but Fastmarkets believes it will continue to grow steadily at a more consistent year-over-year growth rate over the next decade.
Current market trends reflect various regional and country-specific challenges:
- Countries with high EV penetration, such as China and Norway, are seeing slower growth due to market saturation, but China’s robust charging infrastructure combined with affordable EVs will likely continue to drive adoption of consumers
- Sales in Europe and the US fell short of expectations, largely due to interest rates affecting vehicle financing and consumer purchasing decisions.
- The Asia Pacific region is experiencing tremendous growth, especially in emerging economies such as Thailand, which saw nearly 500% year-on-year growth recently, supported by strong government policies and incentives
Sales of plug-in hybrid electric vehicles (PHEVs) have grown at a stronger rate than full EVs in the US and China. In China, market saturation in big cities and the lack of established EV charging infrastructure in rural areas are making PHEVs a more practical choice. In the US, PHEVs appeal to buyers who are reluctant to switch to fully electric cars due to range anxiety and a preference for long-distance trips.
What are the latest EV battery chemistry trends?
NCM (nickel cobalt manganese) chemistries have seen a resurgence in the past year, particularly for NCM 622 and NCM 523 as a result of lower BRM prices. The demand for LFP (Lithium Iron Phosphate) has also increased.
LMFP (lithium manganese iron phosphate) has recently been included in the Fastmarkets chemistry forecast due to rapid advances in LMFP cell manufacturing and commitments from original equipment manufacturers (OEMs) to use this chemistry. We are forecasting LMFP to capture 17% of the electric passenger vehicle market by 2034.
Sodium-ion batteries, similar to LFPs, arrived on the scene due to high lithium prices in 2022. Given the low prices of lithium at the moment, there is little incentive to commercialize sodium-ion technology and it is expected to capture only 4% of the battery market by 2034.
In terms of energy storage, solid-state batteries are generating interest due to their potential for significant advances in charge range and time. Recent announcements, such as Toyota’s claims of 750 miles and 10-minute fast charging, underscore their promise. However, there are still significant technical and manufacturing challenges to be addressed before they can be widely commercialized.
What are the challenges in reducing dependence on Chinese supply chains?
There are many policy and regulatory efforts to regionalize supply chains, such as the Inflation Reduction Act (IRA) aimed at supporting and investing in clean energy in the US, the push to divest Chinese investment from lithium projects in Canada, and the establishment of the National UK Security Investment Act.
In terms of markets, graffiti is a great example that illustrates the challenges in moving away from Chinese supply chains. With the US critical minerals regulations coming into effect in 2025, no EVs will qualify for 30D tax credits under the foreign concern entity (FEOC) definition, as almost all natural anodes are produced or processed in China .
Another example of this is nickel. Indonesia’s dominant nickel market, supported by the Chinese steel industry and investment, faces compliance challenges with FEOC guidelines. Over 25% Chinese ownership in major projects and the lack of a US free trade agreement affect its eligibility for new EV tax credits under the IRA.
There will be significant challenges in reducing dependence on China due to its established dominance in this space. Policymakers need to understand that building economic capacity and resilience takes time.
What should BRM market participants be watching for in the next decade?
1. The impact of the low-price environment on the supply of BRM
This is expected to cause BRM supply challenges until the late 2020s, leading to deficits in the next decade. Weak market sentiment is discouraging investment and the development of essential projects, which could hinder the establishment of supply chains outside of China.
2. China’s response to the low-cost environment
China remains poised to dominate global EV and battery production, posing risks to the US and European auto industries. It can move to support financially challenged projects or invest in underfunded areas such as Africa and South America.
3. Battery recycling and the circular economy
This will significantly impact the BRM industry in the next decade. Regulations focused on minimum recycled content and supply chain performance will drive increased use of recycled materials in batteries.
4. Green premiums and other pricing mechanisms
The industry should anticipate the emergence of pricing mechanisms for green or low-carbon materials in BRM markets in the coming years. These mechanisms may include regional premiums linked to regulatory compliance, such as the IRA.
Fastmarkets’ Fast Forward podcast provides invaluable insight for industry professionals, metal traders and battery material buyers. For more in-depth discussion and to stay updated on the latest trends, be sure to listen to the full episode and subscribe to the Fast Forward podcast.
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