Fears for metal supplies linger, prices soon to surge savagely

Lithium and nickel supply levels were in the news this week, as questions were raised over their long-term availability for batteries and EVs. The first concern was raised by Lithium Australia’s managing director, speaking to Small Caps, saying that even a looming supply glut is not a positive sign, as long-term demand is still going to outstrip supply.

The second warning stems from Bloomberg sources, quoting Independence Group NL, an Australian nickel producer, CEO Peter Bradford, who said that the production volumes of EVs and plug-in hybrids were putting strains on the supplies of class one nickel. The metal has increased in price by 35% in a year on the London Metal Exchange.

Nickel is also a key ingredient in lithium-based batteries, as it is used to prolong the life of the cathodes (the positive electrode), but it is also used as a primary ingredient in nickel-metal-hydride (NiMH) batteries too, which are still popular in hybrid vehicle designs.

In lithium-ion, the anode (the negative electrode), is usually comprised of graphite, and an electrolyte acts as the conduit between the two electrodes – with an insulating separator between the two, to prevent short circuits. The charged lithium ions can pass through this separator, as they move between the cathode and the anode, depending on if the battery is charging or discharging.

Millions of words have been written about the geopolitics of the global supply chain for these materials. China is often cast as a villain of sorts, threatening to cut off its natural resources that the rest of the world is so dependent on. Australia derives much of its GDP from the extraction of such materials, while central Africa has also proven a battleground of sorts, on which the global players are trying to secure their future access. Latin America is the other major lithium-rich region.

Returning to Lithium Australia’s Adrian Griffin, the managing director of the lithium extraction and recycling firm, who warns that the current fearmongering and analyst claims, that lithium will enter a glut of supply amid a rapid increase in hard rock production combined with lower EV adoption, do not take into account longer-term market fundamentals. Griffin believes that the current oversupply is a temporary aberration.

To this end, geopolitics resurfaces again, as China is currently the only country that processes lithium into lithium carbonate and lithium hydroxide, which are needed in battery production, despite Australia being a major supplier in its own right. This is where Lithium Australia comes in, as it argues that to meet the long-term demand, the world is going to have to embrace its lithium recovery services – unconventional sources of lithium, as Griffin puts it.

Currently, global production of lithium is around 200,000 tons-per-annum (TPA), and that, according to Griffin, this will need to reach 3.5mn tons per annum to meet demand in 2030. This demand is largely driven by EVs, which by then are going to be mandated in some countries, and especially popular in China. Griffin cited a forecast of 50mn EVs on the roads by this time.

“New mines targeting lower grades can fill demand gaps, but alternative sources of lithium may prove more attractive as genuine supply shortages put pressure on conventional production,” said Griffin. Lithium Australia is aiming at recovering lithium from dead batteries, waste materials in production and manufacturing processes, as well as through other lithium mineral sources, like lepidolite and petalite.

As for nickel, the Bloomberg New Energy Finance forecast puts nickel demand at increasing 16x by 2030, with over half that expected to be used in batteries. Worryingly for many, Independence Group’s Bradford says that “the dramatic price rise we’ve seen will pale into insignificant compared to the future.”

McKinsey puts the global value of lithium, nickel, and cobalt, for use in batteries, at around $5bn annually. Cobalt is the largest share of this, at around 60%, with lithium on 30%, and class-one nickel at around 10%. When the firm draws the line between today’s prices and the anticipated 2030 demand levels, these are expected to hit $46bn in 2025, and $134bn by 2030.

Those massive price increases could exacerbate the problems of slave and child labor in the supply chain, as well as environmental pollution from unscrupulous extraction. Given the projected rise, it is clear why there is such interest in recovering these metals from used batteries, but working backwards from today’s supply levels, there won’t be enough spent resources in the supply chain to meet much of future demand via reclamation. Significant expansion in resource extraction capability is certain to happen.