We begin with a focus on the recent bull run in the battery metals space, particularly looking at lithium and nickel, discussing current and future price estimates. Henrique Ribeiro, Latin American Metals Editor at S&P Global Platts describes how we’ve seen a clear uptrend recently which is supported by the rising sales of EVs, most notably with the push from Europe that we’ve seen this year, as the main driver pushing prices up. He notes that nickel prices on the LME have fallen sharply since they peaked in February, but the fundamentals are still strong. The market reached some surplus last year due to the pandemic, but this surplus is expected to narrow significantly and become a deficit moving forward.
James Stewart, Portfolio Manager, Global Resources at Ausbil Investment Management notes that part of what surprised the supply chain is the speed at which EV sales have grown, especially across Europe through 2020 and 2021 and the growing thematic in the US. The view over the last few years what that you could buy plenty of lithium. However, we’ve seen a lot of prospective projects haven’t come online to meet the demand and so there’s a scramble to secure the necessary supply.
The market reached some surplus last year due to the pandemic, but this surplus is expected to narrow significantly and become a deficit moving forward.
On the nickel front, Sophie Lu, Head of Metals & Mining at Bloomberg NEF explains that the fact that Tsingshan is exploring converting NPI capacity into nickel mat reflects the fact that they’re trying to diversify their pathways to Class 1 nickel. She notes that we’re not looking at a crash in nickel prices like that which we experienced when Tsingshan first disrupted the Class 2 nickel space. This initial knee-jerk reaction in the market is just a reflection that nickel was overpriced to begin with, given that the market is still in oversupply.
Moving on to the topic of vertical integration in the market and OEM involvement on the mining side, Tim Bush, Executive Director, Global Coordinator, Electric Vehicle Battery Research at UBS explains that the legacy OEMs need to be selective of where they deploy their capital and that the battery system, battery pack, and software are all areas where they may want to invest. He predicts that we’ll be seeing more JV models such as what we’ve seen between General Motors and LG Chem to help build capacity in North America. Lu notes that there is a more favourable environment for financing for companies that are exposed to the green thematic now and so we should see solutions emerging to the question of missing capital in the upstream space soon, which doesn’t necessarily require us to draw from the capital resources of the downstream customer. Steward agrees that though we see a gap where projects need to be funded, most of the OEMs don’t want the risk involved on the mining side. The panellists also touch on supply chain localization and securitization and the implications of this on both the mining side and the downstream, potential production capacity and more.
We’ll be seeing more JV models such as what we’ve seen between General Motors and LG Chem to help build capacity in North America.
Looking at battery chemistries, the panellists debate the adoption of LFP versus NMC and the political implications around adoption, the risks, and the alternatives available. Noting the recent explosions and fires, Bush states that these should not be a barrier to adoption and that more needs to be done around consumer acceptance and education on the safety of EVs.
As we look across the short-term outlook, Stewart notes that the thematic towards green energy and renewables is incredibly strong and that the emissions from battery production is the next step that needs to be addressed. Lu shares more information on the growth of using renewables on mine sites, especially across Australia. Bush looks at the energy storage batteries and the potentials there, noting the recent situation we saw in Texas and the greater focus we may see on grid localization. Finally, Ribeiro notes the growing impact of ESG criteria and that he’s curious to see how the OEMs will act moving forward in relation to securing ethically sourced raw materials and batteries.
Panellists:
James Stewart, Portfolio Manager, Global Resources, Ausbil Investment Management
Tim Bush, Executive Director, Global Coordinator, Electric Vehicle Battery Research, UBS
Henrique Ribeiro, Latin American, Metals Editor, S&P Global Platts
Sophie Lu, Head of Metals & Mining, Bloomberg NEF
