Battery Metals

Over the past week, Chinese lithium consumers continued to top up their inventories and scrambled for any available spot unit before logistics in China start to come to a halt ahead of the Chinese New Year holiday, a report by Fastmarkets states.

The analyst’s price assessment for lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price range exw domestic China was $47,025-51,728 per tonne on Thursday, up by $4,000-6,000 per tonne from a week earlier.

According to Fastmarkets, offers for battery-grade lithium carbonate continue to rise in China, mainly due to the increased demand from the ramp-up of lithium-iron-phosphate battery production this year and consumers restocking before the Chinese New Year holiday.

The dossier notes that spot units of battery-grade lithium carbonate have been scarce in China, with several major Chinese lithium producers already sold out.

“On the supply side, some Chinese lithium producers are in maintenance and [their facilities] are being shut down in January or during Beijing Winter Olympics,” the document reads. “Despite the current high prices for battery-grade lithium carbonate, market participants are still bullish. They expect prices to rise even further in the first quarter of 2022 amid tight supply and firm demand.”

Citing a Chinese lithium trader, the price reporting agency also mentioned that the scarcity of technical-grade lithium carbonate – the typical feedstock for battery-grade lithium carbonate production – in the spot market is being widely felt with some producers not being able to fulfil their long-term contracts.

Fastmarkets’ price assessment for lithium carbonate 99% Li2CO3 min, technical and industrial grade, spot price range exw domestic China was $43,900-45400 per tonne on Thursday, up by $1,500 a week earlier.

“The scarcity of battery-grade lithium carbonate and its rapidly rising price also buoyed that of battery-grade lithium hydroxide in China, with limited supply proving additional support,” the report reads.

Fastmarkets’ price assessment for lithium hydroxide monohydrate, LiOH.H2O 56.5% LiOH min, battery grade, spot price range, exw domestic China was $37,600-29,200 per tonne on Thursday, up by $780-1,565 per tonne a week earlier.

“The price gap between battery-grade lithium hydroxide and carbonate is wide enough for converting lithium hydroxide into carbonate,” the dossier states. “As such, the price of lithium hydroxide of the same grade was also driven up, since demand increased with such conversions taking place.”

Fastmarkets’ assessment of lithium carbonate 99.5% Li2CO3 min, battery grade, spot price ddp Europe and US was $34-36 per kilogram on Thursday, up by $2 per kg from $32-34 per kg a week earlier. Similarly, the firm’s assessment of lithium hydroxide monohydrate 56.5% LiOH.H2O min, battery grade, spot price ddp Europe and US was at $35.00-36.00 per kg on Thursday, up by $2.50 per kg from $32.50-33.50 a week earlier.

The electric vehicle (EV) industry will dominate demand for lithium in the coming years, Chilean copper agency Cochilco said this week, accounting for almost three quarters of the battery metal’s consumption by 2030, up from 41% in 2020.

According to the industry body, lithium hydroxide will take the leading role, reaching 56% of the total consumption versus 44% for carbonate by the end of the decade. This switch can be mainly explained by manufacturers’ growing preference for nickel-intensive cathodes, which tend to favour the use of hydroxide over carbonate, Cochilco said.

Demand associated with cell phones, computers and tablets and other consumer goods would reach 411,000 tonnes in 2030, compared with the 79,000 tonnes expected for this year, the body estimated.

Chile, already the world’s top copper producer, is trying to regain some of the market share it lost to Australia in 2018. Last year, it produced about 18,000 tonnes of lithium, far behind the nearly 40,000 tonnes generated in Australia.

Both copper and lithium are among the most coveted commodities as they are both used in EVs and infrastructure to support other green technologies.

Touchy subject

The outgoing government of President Sebastián Piñera had invited bids in October from private companies to expand lithium production to 400,000 tonnes a year. The plan, however, has triggered a debate among Chileans, who are at odds over the social and environmental risks of lithium extraction.

Lawmakers from the center-left opposition party PPD filed on Tuesday an objection before an appeals court in the capital, Santiago, to halt the bidding process. And on Wednesday, the centrist Christian Democrats introduced a bill in the Chilean legislature to prevent sitting presidents from inviting new mining-contract bids in the final 90 days of a term.

Piñera, 72, will hand over power in March to left-winger Gabriel Boric, whose team accuses the outgoing administration of trying to rush through the new contracts at a time when the country is reassessing its stance on natural resources in a process to draft a new constitution. 

How to handle lithium production is likely to be one of the toughest issues Boric will face. The 35-year-old former law student, vowed during his campaign to bury Chile’s “neo-liberal” economic model and kick off an ambitious climate action plan.

Although he later softened his message, Boric has kept the idea of giving the State a more active role in the sector, imposing higher royalties and creating a national lithium company. 

With prices soaring on the global market, lithium mining could become a key source of income for his government, even as it could impact the ecology of the Atacama salt flat, where area the world’s two largest lithium producer, Albemarle (NYSE: ALB) and SQM (NYSE: SQM), have operations.

ESG Challenges

Lithium miners are facing increasing pressure from investors, regulators and other stakeholders as the full EV value chain is subjected to growing scrutiny from an Environmental, Social and Governance (ESG) perspective.

Despite the key role lithium-based batteries play in the green transition, producers are not without their ESG challenges, BMO analyst Joel Jackson wrote in a note to investors.

“There’s no free lunch – lithium is helping to decarbonize transportation systems and fuel the EV transition, but it’s an extractive commodity, Jackson said. “Freshwater use in S.American brine operations is frequently raised as a sustainability concern, but lithium produced from spodumene conversion seems more problematic when considering GHG emissions and by-products”.

The Metals Company (NASDAQ: TMC), formerly Deep Green Metals, an explorer of lower-impact battery metals from seafloor polymetallic nodules, announced Thursday the completion of its latest offshore research campaign, Environmental Expedition 5E, a targeted sampling campaign of both benthic and pelagic fauna with wider investigations to characterize ecosystem function on the abyssal seafloor.

Mining international waters is in the spotlight as companies and countries are looking at minerals concentrated on the ocean floor that can be used in batteries for smart phones and electric vehicles. Last year, the company said the nodule resource is now estimated at four megatons (Mt) measured, 341Mt indicated and 11Mt inferred mineral resources.

The completion of the six-week expedition — the company’s fifth environmental campaign in the last twelve months — marks the latest offshore campaign required to develop an environmental baseline of the proposed operating environment in the Clarion Clipperton Zone (CCZ) of the Pacific Ocean and characterize the potential impacts of its proposed nodule collection operations to source critical battery metals from deep-sea polymetallic nodules.

This year, the Metals Company said it will conduct an initial Prototype Collector Vehicle manoeuvrability test in the Atlantic Ocean, followed by pilot collection system trials in the CCZ later in the year.

Aboard the Maersk Launcher were researchers from some of the world’s leading marine science institutions including the UK National Oceanography Centre (NOC), Japan Agency for Marine-Earth Science & Marine Technology (JAMSTEC), Natural History Museum (London), Heriot-Watt University and the University of Gothenburg, who deployed a range of technologies, including a Remotely Operated Vehicle (ROV) and a number of seafloor landers.

Over the course of more than 390 ROV operational hours, researchers from the UK National Oceanography Centre conducted visual observations of over 30-square-kilometers of seafloor, capturing more than 35,000 high-resolution images and extensive video data which will be used to identify megafauna at depths of 4,000 meters.

Whereas prior campaigns utilized randomised boxcore sampling to obtain macrofaunal samples, the technologies used for Expedition 5E allowed the team to conduct highly targeted sampling of benthic macro and megafauna and to focus on species of particular scientific interest, the company said.

To explore the gelatinous communities that occupy the midwater column, the pelagic team led by JAMSTEC supplemented traditional sampling methods such as nets with ROV mounted video to conduct 130 video transects at various depths, and used specialized D-samplers and the ROV’s suction sampler to collect specimens.

Five campaigns in one year

“With five research campaigns under our belts in the last twelve months, the all-star research teams we’ve brought together are helping build a high-resolution picture of the potential impacts of collecting nodules, CEO Gerard Barron, said in a media statement. “This data will enable our engineering and project teams to optimize our activities for low impact and ensure that we lift the nodules to the surface with the lightest possible touch.”

As countries invest in large-scale clean energy transition programs and begin to phase out internal combustion engines, hundreds of millions of tonnes of critical battery metals will be needed to decarbonize the world’s energy and transport systems, according to the International Energy Agency.

The polymetallic nodule fields in the CCZ of the Pacific represent the largest known, undeveloped nickel resource on the planet, the company said. A DeepGreen-commissioned white paper found that nodules under exploration contracts in the CCZ contain more than enough battery metals to power one billion EVs and with a fraction of the social and environmental impacts when compared to land-based ores.

Environmentalists have called for a ban on deep-seabed mining that would extract resources including copper, cobalt, nickel, zinc, lithium, and rare earth elements from nodules on the ocean floor.

The International Seabed Authority (ISA), a U.N. body headquartered in Jamaica, has drawn up regulations on exploration, but has yet to establish the rules for exploitation needed for mining to go ahead.

The ISA has rejected criticism from Greenpeace over its handling of ocean mining, fuelling a spat that threatens to overshadow talks by the U.N. body towards rules for deep-sea mining.

As noted in a recent report by the International Renewable Energy Agency, polymetallic nodules can “substantially change the supply outlook for several critical materials,” including nickel and cobalt.

The global cobalt supply chain is set to remain highly geographically concentrated in the coming years — in the DRC for mine production and in China for refining — which will likely pose procurement challenges for battery manufacturers, market analyst Fitch Solutions finds in its latest industry report.

Yet the global cobalt industry is set to receive a significant boost from the worldwide shift to a green economy, Fitch says, as the ferromagnetic blue metal is a key component of rechargeable batteries and valued for its stability, hardness, anti-corrosion and high-temperature resistance characteristics.

Used historically as a pigment, due to its luminous blue colour, the metal’s main use today is in the precursors and cathodes of rechargeable batteries (56% of total consumption as of 2021). Employing cobalt as the cathode of rechargeable batteries efficiently improves their energy density, power, and performance as compared to batteries that lack cobalt.

Cobalt is also used in the manufacturing of nickel‐based alloys (13% of total consumption) which are used extensively in the aerospace industry, tool manufacturing (8% of total consumption) and finally smaller amounts in pigments, soaps and as catalysts.

The end use of cobalt is primarily in portable electronics (36.3% of global consumption), such as smartphones and laptops, while automotive applications also account for a major share (23%) and Fitch expects the latter to drive cobalt demand in the coming decades.

Cobalt is recovered mainly as a by-product of copper and nickel mining, with its availability dependent on the ongoing mining of its host metals. Stratiform sediment-hosted copper-cobalt deposits, mostly in the DRC and Zambia, represent the world’s largest source of cobalt, followed by nickel-cobalt laterite deposits (mainly found in Australia, Cuba, New Caledonia, Madagascar, Papua New Guinea and the Philippines) and lastly magmatic nickel-copper-cobalt-PGM deposits (mainly Canada, Russia and South Africa), Fitch notes.

While cobalt-rich crusts on the ocean floor could contain as much as 1bnt of cobalt resources, deep-sea mining is still in its infancy given obvious technological and economic constraints.

Upward price trajectory to boost production

Fitch expects prices of cobalt sulfate will remain on an uptrend in the coming 2-3 years as demand from battery manufacturers continue to outstrip supply despite a healthy pipeline of cobalt sulfate projects set to come online from 2023-2024 onwards. This, the analyst says, will support production and investment into new projects.

China’s accelerated New Electric Vehicles uptake will largely drive global cobalt sulfate demand in the short to medium term, Fitch says, while increasing EV penetration in Europe in the coming decade will support demand over the longer term. While Fitch expects a production boost to occur from existing projects in the pipeline coming online in three-five years onward, prices will remain on an upward trajectory as demand will also accelerate in tandem.

However, there is currently a solid global project pipeline, due to the rise in cobalt prices and the expected demand boom amid the proliferation of battery manufacturing projects, which will aim to diversify to some extent production channels, Fitch says.

Australia holds significant growth potential in the cobalt-producing landscape, with multiple integrated cobalt projects in the pipeline. Fitch sees limited production growth in Europe and North America in the coming years due to the lack of resources and projects. The battery revolution, the analyst points out, will increasingly dictate cobalt production trends, with most of global refined cobalt being converted to chemical forms that are used in rechargeable batteries as opposed to cobalt metal that is mainly used in other industries.

While Fitch holds an optimistic view on new cobalt projects that are expected to come online over the next decade, the analyst highlights that risks to the completion of these projects are abound. Many are still in the pre-feasibility stage, especially in Australia, and may not reach fruition in the end due to lack of finance or environmental opposition for instance. Global cobalt projects are also likely to face environmental scrutiny, Fitch says, whereas the possibility of batteries without cobalt might dampen the metal’s demand outlook and prices altogether.

Panasonic, Tesla’s main battery partner since its earliest days, plans to use recycled materials supplied by a startup led by the electric-car maker’s former tech chief to produce lithium-ion cells in a more sustainable, “closed loop” fashion.

Redwood Materials, which already collects and recycles scrap and used battery components from Panasonic, is to begin supplying it with copper foil this year for use in making new lithium-ion cells at Tesla’s Gigafactory in Sparks, Nevada, the electronics company said Tuesday during its CES presentation. Reusing scraps and old batteries can help ensure Panasonic meets a goal of sustainable production as output grows throughout the 2020s, said Allan Swan, president of Panasonic Energy North America.

“Redwood is creating a circular supply chain for electric vehicles and clean energy products here in the United States, making them more sustainable and driving down the cost of batteries,” he said in a video presentation. “By the end of this year we expect to include Redwood’s copper foil produced from recycled materials back into our new battery production.”

Founded by JB Straubel, Tesla’s longtime chief technology officer and a cofounder of the EV company, Redwood is moving quickly to become a leading supplier of recycled metals and materials that it’s recovering from used batteries, battery scrap and electronics. Based in Carson City, Nevada, near the Gigafactory, the company has raised about $800 million to expand its recycling business as demand for EV batteries–and the costly commodities needed to make them–grows.

Redwood said Panasonic’s use of copper foil from recovered material will be the first such closed-loop battery production process–in which batteries are recycled, remanufactured and returned to the same factory.

In September 2021, closely held Redwood said it would invest more than $1 billion to construct $1 a large U.S. plant to make materials needed for EV batteries by 2025, though it hasn’t announced the location yet.

During his time at Tesla, Straubel was instrumental in overseeing the design of the carmaker’s battery pack and motors, beginning with the 2008 Roadster. He also helped set up and run the massive Gigafactory, the biggest U.S. battery plant. He left Tesla in late 2019.

Currently, Panasoninc produces about 2 billion battery cells a year at the Tesla facility.

“And as much as we’ve scaled up production, the biggest opportunity lies in front of us,” Swan said. “We’re looking at a five times growth over the next decade, as more and more vehicles go electric.”

Gold extended its decline heading into 2022, falling by more than 1% on Monday as a risk-on rally in equities pressured bullion, with investors shrugging off concerns surrounding the omicron coronavirus variant.

Spot gold dipped 1.6% to $1,799.50 an ounce by 12:15 p.m. EDT, set for its biggest single-day decline in over a month. US gold futures also fell 1.6% to $1,799.40 an ounce in New York.

S&P 500 futures approached record levels on Monday as equity markets looked to extend a recovery from the pandemic shock into the new year.

Benchmark 10-year US Treasury yields meanwhile rose to a six-week peak, drawing investors away from the non-yielding bullion.

Also pressuring gold by making it more expensive for overseas buyers, the dollar rose against a basket of major currencies, tracking government bond yields as investors anticipate the US Federal Reserve to stay on its path of interest rate hikes in 2022.

“Rising yields, a firmer dollar and improved risk sentiment are boosting equities, collectively putting pressure on the gold market,” Bob Haberkorn, senior market strategist at RJO Futures, told Reuters.

Bullion ended the previous calendar year down 3.6%, the biggest annual decline since 2015, as major central banks around the world started to dial back pandemic-era stimulus to fight inflation.

UBS analyst Giovanni Staunovo said rising US interest rates and declining inflation over the course of 2022 could weigh on gold, forecasting a price of $1,650 at the end of the year.

Some investors view gold as a hedge against higher inflation, but bullion is highly sensitive to rising US interest rates, which increase the cost of holding the commodity, he said.

With major markets all closed for holidays, investors will look ahead to the release of minutes from the Fed’s latest meeting on Wednesday and the US nonfarm payrolls figures due Friday.