Five battery metals trends to keep an eye on in 2020
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2019 was a year that many companies involved in the battery materials sector would like to forget, but there are emerging signs that 2020 will be a little less painful.
It is still early days for the ‘green’ automotive industry, consultancy Wood Mackenzie says, but global interest around electrification shows no signs of slowing.
Woodmac identified five areas that it would be watching closely in 2020.
Sales of new energy vehicles (NEVs) in China and US contracted in 2019, but 2020 is the year when several major automakers launch ‘mass-market’ electric vehicles on dedicated platforms, aimed at breaking down range and cost barriers.
However, Woodmac says that while substantial quantities of these new vehicles are expected to trickle into the market in the second half of the year, annual sales of passenger EVs are likely to remain below 3 million units.
It noted that while China’s move to postpone the complete removal of NEV subsidies this year will support EV sales, it also highlights just how sensitive the emerging market still is to subsidies and incentives.
Woodmac expects lithium iron phosphate (LFP) batteries to make a comeback this year in China, due to significant energy density improvements that make those chemistries a viable option.
Additionally, nearly every new EV model boasts a bigger battery to address the known concern about EV range, a trend that Woomac expects will continue through the short term.
Despite the relatively positive outlook on EV sales, Woodmac expects lithium price declines to extend over the next 12 months.
Oversupply was the common theme in 2019. In 2020, some higher cost producers will feel the pressure as spodumene prices fail to recover.
This also means that the economics of new hard rock projects now look less attractive and junior miners will increasingly have to emphasise their green credentials and strategic locations, something the battery and EV space is being heavily scrutinised on.
Woodmac added that the ramp-up of South American brine projects will most likely be slower than guidance, with water rights and technical challenges still key issues.
Cobalt prices could rise this year if major producers fail to ramp up production to meet the supply gap caused by Glencore placing its Mutanda mine on care and maintenance.
Woodmac said that while its base view is that mined output returns to 2018 levels, this includes a deficit of about 2,000 tonnes to draw down stocks that have accumulated through the cobalt value chain.
The supply gap is expected to be met by Glencore’s other DRC project, Katanga, where interim solutions appear to have alleviated quality issues relating to its uranium content, and ERG’s Metalkol RTR plant, which is dealing with quality issues and the poor market.
2020 is also expected to be a challenging year for the graphite market with Woodmac questioning if the industry even needs a mine as large as Syrah Resources’ (ASX:SYR) Balama mine at the moment.
Woodmac believes that with margins being squeezed and an increasing focus on sustainability encouraging ex-China sourcing, many graphite miners, including Syrah, will continue to move down the value chain towards high-purity spherical graphite.