High Voltage: China may dominate 90% of the world’s cathode production by 2030, but the devil’s in the detail
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Our High Voltage column wraps all the news driving ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, manganese, magnesium, and vanadium.
Europe and the US appear determined to secure their own battery supply chains and drastically reduce their reliance on China.
While demand is ostensibly growing for battery material which bypasses China, data from Benchmark’s Cathode Forecast shows that China is set to extend its dominance, increasing its share of production from 78% in 2022 to 87% in 2030.
The cathode is a crucial part of the battery which contains high value metals like cobalt, nickel, manganese and lithium.
The data highlights how China’s total output is set to increase by a further 5.3 times from now until 2030, despite efforts to develop cathode capacity in the rest of the world which is only forecast to increase 2.8 times in the same period.
“China has a stronghold grip on the market,” Robert Burrell, an analyst at Benchmark, said.
“China will produce far more [cathode active material] than it needs domestically.”
Firstly, many of the cathode facilities in planning or under construction are from Tier 3 producers, who currently do not supply the EV market.
“This tier currently makes up just under a quarter of China’s cathode production in 2022, but will grow to nearly half by 2030,” Benchmark says.
“Tier One producers, those which can supply ex-China automotive markets, will see the lowest growth in the country of all the tiers, and will shrink from 66% of production in 2022 to just 43% in 2030.”
Looks like the ex-China world may need more of its own cathode production after all.
There are different types of cathode chemistries.
Central to China’s growth is its LFP (lithium iron phosphate) cathode industry, which Benchmark forecasts will account for 69% of the country’s cathode output in 2030, up from 44% in 2022.
They are ostensibly cheaper than the incumbent NCA or NCM (nickel manganese cobalt) cells mainly because they don’t require scarce and price-volatile metals such as nickel or cobalt.
This is offset by their lower energy densities, which makes them not-so-good for gruntier, long range vehicles.
Benchmark forecasts that in 2030 China will produce 98% of the world’s LFP.
However, between 2022 and 2030, China’s share of NCM production will drop from 39% to 22%.
“China’s EV demand is less driven by range anxiety as in North America and Europe, leading to a lower demand for high energy cathodes such as NCM,” Benchmark says.
Here’s how a basket of ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, magnesium, manganese, and vanadium is performing>>>
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Lithium explorer QXR Resources (ASX:QXR) appointed new managing director, Steve Promnitz.
Steve was previously managing director of lithium project developer Lake Resources (ASX:LKE), which he took from a small cap nobody to $2.1bn market cap near-term miner.
Eastern Resources (ASX:EFE) hits thick pegmatites (lithium bearing rock) in 30 of 32 drillholes at the Trigg Hill project in WA.
This former iron ore junior went all-in on lithium after cementing a deal with Chinese battery materials giant Yahua to find and develop Aussie projects late last year.
Yahua Group is one of China’s major lithium chemicals producers.
Alchemy Resources (ASX:ALY) was drawn first in a ballot for new ground along strike of Global Lithium Resources’ (ASX: GL1) 9.9Mt Manna lithium deposit and adjacent to Breaker Resources’ (ASX: BRB) 1.7Moz Lake Roe gold project.
It’s no wonder the 24.8sqkm tenement was in demand. ALY beat out “multiple parties”, the company says.
It will be added to ALY’s 1,220sqkm Karonie lithium and gold project, about 120km east of Kalgoorlie.
Winsome Resources (ASX:WR1) is reporting “exceptionally high-grade assays” up to 4.89% lithium in sampling of a new discovery at the Adina project in Quebec.
10 of the 26 samples collected graded over 2% Li2O. But the proof will be in the drilling, which is set to kick off early next month.
Prospect Resources (ASX:PSC) acquired 51% of the Omaruru lithium project in Namibia, which offers potential “to establish a resource quickly, with walk-up drill targets and a great operating environment,” boss Sam Hosack says.
PSC recently sold its 72.7Mt Arcadia lithium project in Zimbabwe to a subsidiary of lithium-ion battery material producer, Zhejiang Huayou Cobalt Co, for ~$466m net.
It returned most of that to shareholders.