The push and pull in the global battery metals market

The push and pull in the global battery metals market 

In the last ten years, critical minerals have climbed the agenda for governments and companies as key components of the energy transition. This group of metals and minerals, including lithium, nickel, cobalt, graphite, copper, aluminium and rare earth elements, are crucial particularly to manufacture the batteries needed to store renewable energy and power electric vehicles (EVs). The sector has become so important that countries from the US¹ to the UK² are developing strategies and policies to ensure supply and help them reach their climate targets. 

While critical minerals are located in a number of countries, mostly in Asia, South America and Africa, the overwhelming bulk of processing is done in China. The International Energy Agency (IEA), which launched a Critical Minerals Policy Tracker in 2022³, found that globally in 2019, processing of copper (40%), nickel (35%), cobalt (65%), lithium (58%) and rare earths (87%) was dominated by China.⁴ Supply was also concentrated, especially cobalt extraction - Democratic Republic of Congo (69%), Australia (4%), Russia (4%), graphite extraction - China (64%), Mozambique (10%), Brazil (9%), and rare earths - China (60%), US (16%), Myanmar (11%).⁵ 

Concern over security of supply has driven investment in the sector aimed at sourcing new mines and building production levels. But although demand is almost certain to grow (providing efforts to combat climate change continue), it’s by no means been a steady march. In 2023, battery metal prices collapsed, with cobalt, lithium hydroxide, and flake graphite prices falling 46%, 36%, and 21% y/y, respectively.⁶  

Driving down prices 

A combination of factors is driving this downward pressure on prices. The most surprising is a slowdown in uptake of EVs across the board, although total sales are still growing. In March this year, the Financial Times reported that General Motors and VW were slowing their expansion of EV capacity and focusing on hybrids instead.⁷ Data from the industry reported by the FT also showed carmakers were heavily discounting EVs across the US, Germany and the UK to try to boost sales. 

China is the world’s biggest EV market, accounting for around 60% of total global EV sales in 2022.⁸ And in this market, sales are still growing rapidly, reaching 8.1 million in 2023, up 35% from 2022.⁹ But wider concerns about the slowdown in China’s economy are hitting sentiment on projections of future sales.¹⁰ 

At the same time, efforts to increase supply have outstripped current demand. Some producers have made efforts to slow down again, such as BHP temporarily suspending Western Australia Nickel¹¹, but others are continuing to ramp up. The US, for example, looking to secure new supply at home, has given Electra $20m to build a cobalt plant in Canada.¹² 

Chinese miners and refiners are also continuing to invest in building up capacity in lithium in Africa, although many new mines and expanded production won’t be up and running until 2030. 

Supply vs demand 

Investors are in a push and pull scenario here. Demand is likely to lift at some point, because these minerals and metals are critical for battery manufacture and resources are finite and geographically concentrated. Therefore, securing future supply for stable production of batteries - and EVs - is essential for battery and carmakers. However, for now, concerns about the global economy, interest rates and inflation, and a cost of living crisis in many of the largest EV markets is keeping demand for EVs down. 

Along with economic uncertainty, investors are also watching regulatory moves. In June, the European Commission (EC) imposed levies of up to 38.1% on Chinese electric vehicles, to combat what it sees as unfair state subsidies for Chinese .¹³ Added to the existing 10% levy on cars imported into the EU, this means that Chinese-made electric cars will now face total tariffs of up to 48%. The US already has a 100% tariff on China’s EVs and greentech, which the Biden administration said was aimed at stopping cheap imports and ensuring the growth of America’s own green industry.¹⁴ 

Navigating the battery metal market 

It takes an increasingly delicate hand to manage these factors and secure stable investments in the sector, which is one of the reasons why Tullett Prebon, another company in the TP ICAP group with Parameta Solutions, recently launched a battery metals desk.¹⁵  

Announcing the launch in April, Tom Fox-Hughes, Commercial Manager, Energy & Commodities APAC for TP ICAP Group said; “In what is an exceptionally fast-evolving asset class, clients are seeking real expertise to help navigate markets. With demand for electric vehicles (EV) fluctuating, and the production of battery metals rising rapidly, clients have a growing need to manage price risk and exposure.  

“Our new desk, and the experienced hires we have made to lead it, will help us grow liquidity and support customers worldwide as the global energy transition continues to advance.” 

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