Fastmarkets battery raw materials market update

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).

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?

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

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).

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

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

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.

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

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

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

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

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

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

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.

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

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

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

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.

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?