The EV Era is Upon Us
The headlines relating to the demand for battery minerals seem to be everywhere these days. As this edition was going to press, Reuters reported that lithium and copper miners were competing for water supplies in the high desert that straddles the border between Chile and Argentina. Then there were the headlines relating to the declining cobalt prices, which have dropped from a recent high of $43/lb to less than $30/lb today. They said that signals the end to the battery minerals rush. That might be true for the speculators, but not the mining business.
Demand for minerals to support the anticipated electric vehicle (EV) explosion has not truly materialized yet. Manufacturers are only now lining up possible supply chains for lithium ion batteries (LIBs). As an example, LG Chem, a South Korean LIB supplier, recently increased its manufacturing plans to 90 gigawatt hours (GWh) of capacity in 2020 from the previous target of 70 GWh. Future use of LIBs in massive energy storage systems (ESS) will compound the demand. In June, Pacific Gas & Electric (PG&E) requested approval from the California Public Utilities Commission for four energy storage projects totaling about 2,270 MWh. The commission authorized PG&E to solicit bids to replace three power plants. PG&E selected offers for three ESS totaling 385.5 MW, 1,540 MWh. To add some perspective, this project would be three times the largest, which is Teslaís 100-MW, 129-MWh battery in Australia.
Spurred by government subsidies, many countries, most notably China, are encouraging the future use of EVs. The automotive industryís use of LIBs is on track to grow sevenfold to 650 GWh by 2025 from around 70 GWh in 2017, according to a recent report from Metal Bulletin. The battery mineral discussion includes cobalt, graphite, lithium carbonate, lithium hydroxide, manganese, nickel and spodumene. Right now, most of the attention seems to be focused on lithium carbonate equivalent (LCE) and cobalt supplies. Prices for these two metals have been dropping, and thatís probably a good thing.
Exceptionally high-metal prices usually motivate manufacturers to look at replacement strategies. As the prices for raw materials fall, so does the cost of LIBs and ESS, which creates more demand for those minerals. It takes about seven to 10 years to bring a new greenfield mine online. That new battery mineral mine would start producing in 2025 if the project were launched tomorrow and the developers had the wind at their back during the permitting process.
Doubling or tripling battery mineral production in this timeframe would be a tall order, but it has happened recently. In 2008, speculators drove the price of cobalt to $50/lb, anticipating the introduction of the smartphone. The prices subsequently cooled and cobalt was not engineered out of smartphone batteries. Cobalt demand has only increased since. It has remained the cathode mineral of choice for LIBs and the cathode represents about one-third of the manufacturing cost. The global cobalt supply/demand market has grown from 50,000 metric tons per year (mt/y) in 2008 to more than 100,000 mt/y in 2017.
Supplies of LCE and cobalt are abundant. Cobalt production as a byproduct, however, is heavily influenced by the demand for copper and nickel. Despite all of the hype, the fundamentals for this market are extremely strong. To bring new sources of battery minerals to market, the prices will need to remain high enough to support economic extraction, but not so high as to discourage its use.
Steve Fiscor, Publisher & Editor-in-Chief, E&MJ