SPONSOR: Tartisan Nickel (TN:CSE)  Kenbridge Property has a measured and indicated resource of 7.14 million tonnes at 0.62% nickel, 0.33% copper. Tartisan also has interests in Peru, including a 20 percent equity stake in Eloro Resources and 2 percent NSR in their La Victoria property. Click her for more information

The burgeoning electric vehicle (EV) sector has taken the mining industry by storm in the last five years

The burgeoning electric vehicle (EV) sector has taken the mining industry by storm in the last five years with the metals and minerals used in the production of battery energy storage, including cobalt, lithium, graphite, nickel and vanadium taking centre stage.

• Nickel takes the lead as battery metal of choice

The significant interest in these battery metals has caused a flurry of mining companies to enter the race to extract them, causing prices to surge.

Fast-forward to 2019 and the picture looks very different, prices have plummeted, mostly due to demand struggling to keep up with supply, and in some cases better metal substitutes being found.

However, one thing remains clear, the future global demand outlook for EVs remains strong and so does the need for energy storage in renewable energy applications.

Cobalt and lithium – the battery metals front runners

According to Diego Oliva-Velez, commodities analyst at Fitch Solutions, lithium and cobalt prices are likely to remain subdued over the coming months as demand struggles to keep up with new supply coming online.

Because cobalt and lithium have received significant investor interest since 2015 due to their increasing use in lithium-ion batteries, which power the burgeoning electric vehicle industry, the resultant demand and prices for both metals have been on the rise.

“For instance, cobalt prices rose over 300% in the period from 2016 to 2018, while South America lithium carbonate prices rallied over 170% during a similar time frame,” says Oliva-Velez.

“However, rising prices have also spurred a flurry of investments into new cobalt and lithium projects that have significantly loosened both markets – which caused prices to start to unwind since 2018.

The demand outlook for both EV metals waned in 2019, as the removal of Chinese government subsidies to EV manufacturers caused a slowdown across the industry.

In March 2019, the Chinese government announced that from July onwards subsidies for pure battery electric vehicles with driving ranges of 400 km or more would be cut by half.

Furthermore, to qualify for subsidies, electric vehicles now need to have a range of at least 250 km, compared with 150 km previously.

Without these subsidies, Chinese EV manufacturers are having to raise the prices of their vehicles, leading to reduced sales and output numbers over the past months, as they become less affordable to consumers.

However, the Fitch Solutions Autos team believes the subsidy cuts will only have a short-term impact on China’s EV market, as revised government policy calls for a more profound engagement from manufacturers to preserve EV market growth rates, while rising competition will continue to support the EV segment.

Fitch Solutions’ Autos team also highlight that the new policy sets out sales targets for car manufacturers, whereby they must generate credits for selling EVs, which should prop up EV production.

Furthermore, they expect carmakers will move to offset the impact of the EV subsidies cuts with price reductions, which will see demand for EVs remain robust over 2020.

Fitch Solutions forecast EV sales in China to average 20% year-on-year in 2020, slightly up from 19% in 2019.

Despite announcements of supply cutbacks (such as the premature closure of Glencore’s Mutanda cobalt mine in the Democratic Republic of Congo in late 2019) and rising demand, there are a number of new projects due to come online, including Chemaf Sarl’s Mutoshi mine in the DRC, CleanTeQ Holdings’ Sunrise nickel cobalt scandium project and Australian Mines’ Sconi project, both in Australia.

As a result, Fitch Solutions retains the view that both markets will remain largely in oversupply next year – keeping a lid on prices.

Nevertheless, Oliva-Velez expects demand growth for lithium and cobalt to improve in 2020 following a disappointing 2019, as low prices attract purchases from EV battery manufacturers and Chinese EV sales hold strong.

Nickel takes the lead as battery metal of choice

Fitch Solutions’ outlook for nickel over 2020 is more positive as the market will remain in deficit, buoyed by a ban on Indonesian ore exports from January 2020 and ongoing support from the Chinese stainless steel sector.

Despite a steep fall in prices since October 2019, Fitch Solutions believe that prices will rebound from spot levels into 2020 and average US$15 000/t throughout 2020, buoyed by a tight fundamental picture.

Moreover, the global nickel market is expected to remain in a deficit of 12 200 t in 2020, driven by sustained demand from stainless steel production in China.

Based on findings from Fitch Solutions’ own proprietary model, nickel is set to be the primary demand beneficiary of the EV revolution on the metals side in the longer term beyond 2021, significantly ahead of lithium or cobalt – as the use of nickel-heavy NMC cathodes among manufacturers become increasingly prevalent over the same period.

The NMC cathode will become the chemistry of choice for EV manufacturers over the coming years, due to its high energy density, thermal stability and low cost.

Currently, most NMC cathodes are referred to as NMC 622, so-called due to the ratio of metals they contain (6 parts nickel, 2 parts manganese and 2 parts cobalt).

However, due to concerns relating to the price and sustainable sourcing of cobalt, battery manufacturers are in the process of increasing the share of nickel in these cathodes in order to achieve a ratio of 811 (8 parts nickel, 1 part manganese and 1 part cobalt).

“We forecast that the share of NMC cathodes will account for 82% of all new NMC battery sales by 2029, up from just 2% in 2019. This transition will lead to an increase in average nickel content from 7.24 kg to 16.76 kg for each NMC cathode produced over the same period,” says Oliva-Velez.

Nickel upsurge reduces demand for cobalt

The transition towards nickel-heavy NMC 811 cathodes will lead to lower demand for cobalt, which will increasingly be shunned by manufacturers due to price and sustainability considerations.

The unstable and restricted supply of cobalt from the DRC – the largest producer by a significant margin – makes the metal prone to price spikes, as witnessed over 2017.

Secondly, the questionable ethical nature of cobalt supplied by the DRC, due to the prevalence of child labour and conflict mines in the country, will drive battery makers away from the metal in an effort to mitigate reputational risk.

“As a result, we forecast cumulative demand for cobalt from EV batteries over 2019 to 2028 to amount to 218 000 t, considerably less than nickel, lithium and even manganese,” Oliva-Velez points out.

Lithium remains an integral battery metal going forward

Lithium is found in both the anode and cathode of all lithium-ion battery chemistries, being the key element that allows batteries to charge and discharge.

Furthermore, unlike cobalt, global lithium supply is more diversified across a number of better regulated jurisdictions such as Chile, Australia, Argentina and China – making it less prone to price spikes or environmental, social and governance (ESG) concerns.

As a result, lithium will continue to be an integral component of all EV batteries moving forward – supporting global demand levels for the metal over the next 10 years.

Therefore, in the longer term, prices of all key battery metals are set to rise as demand from the EV industry ramps up, with nickel being the primary demand beneficiary.

Graphite – new low-cost sources needed

The biggest driver of the flake graphite market has been the introduction of new supply from Africa – primarily from Madagascar and Mozambique.

In 2018, ASX-listed Syrah Resources brought the world’s largest flake graphite operation into production and the new production volumes introduced to the market from its Balama graphite project in Mozambique have added to excess graphite capacities in China – which has been the world’s leading graphite supplier for a generation. [Insert image of Balama here]

As China focuses its domestic graphite output on value-added markets, there remains a need for need for new low-cost sources of flake graphite material – the anode material of choice for commercial lithium-ion rechargeable batteries – and Africa has several promising projects aiming to fill this role to global markets, according to Andrew Miller, head of price assessments at Benchmark Mineral Intelligence.

“At this stage the introduction of new graphite material from Africa has overtaken the demand growth, which will be largely driven by the production of lithium-ion battery anodes and, ultimately, EV penetration rates,” says Miller.

Moving forward there is a significant backlog to overcome in the market which is likely to see continued depressed prices into 2020. Longer-term however, the industry is still faced with the major task of expanding graphite production to meet the projected growth in battery demand and the low graphite prices of today will not be capable to support the development of many new projects.

As a result, Miller says the market is in a transition period with demand growth on the horizon and an abundance of feedstock material – the question is how much of this can be used in the lithium-ion battery supply chain and how much of this will be available ahead of the major ramp up of battery projects.

Vanadium – the key to renewable energy storage

According to AIM-listed Bushveld Minerals, a low-cost, vertically integrated primary vanadium producer with assets in South Africa, Vanadium currently benefits from having two strong uses driving its demand.

One, the traditional steel sector, where vanadium is used as a strengthening alloy, which boasts a steady growth trajectory according to most general forecasts due to an increase in intensity in use of vanadium.

Two, the energy storage sector, where vanadium is the primary input into vanadium redox flow batteries (VRFBs), which not only benefits the burgeoning renewable energy sector, but significantly, and perhaps more importantly, helps make existing power systems more efficient through load balancing and other forms of grid savings.

Upside in demand from the energy storage sector

Research from Navigant forecasts that the size of the energy storage market will reach US$50 billion within the next 10 years, which represents a growth rate of 58% a year to exceed 100 GWh of capacity by 2027.

While multiple technologies are expected to be successful due to their unique technical and cost advantages and suitability to local conditions, VRFBs are expected to capture approximately 18% of the market, which equates to 20 GWh of demand and nearly $10 billion in revenue in the coming decade.

This confidence is shared by the World Bank, which recently allocated $1 billion to a global battery storage programme (aiming to raise an additional $4 billion in co-investment) to drive market creation and help drive down battery prices in low- and middle-income countries.

From a VFRB deployment perspective, there are already a number of large VRFB projects in progress, including the largest VRFB in the world currently under construction, demonstrating the technological benefits and proven use-cases in countries with established power grid infrastructure.

In South Africa, the country’s recently published Integrated Resource Plan 2019 specifically seeks novel ways to improve grid reliability and access to power over the long-term, with a dedicated allocation of over 2 GW for new energy storage.

As a result of these developments, Bushveld Minerals founder and CEO Fortune Mojapelo is confident that vanadium will continue to feed the primary steel market, while gaining further market share of the important energy sector through VRFBs.

Source: https://www.miningreview.com/battery-metals/battery-metals-long-term-demand-remains-strong-despite-price-woes/