Approaching supply deficits in battery metals are already pushing up prices in the EV supply chain: Benchmark 

Nearly all crucial battery metals will witness supply deficits in the next decade as mining projects struggle to come online, Benchmark Mineral Intelligence analysts have said.  

The research group that specializes in the electric vehicle supply chain believes that the world is already witnessing the “great raw material disconnect” impact the end user.  

“Lithium-ion battery cell prices are set to increase for the first time in over a decade as the cost of raw materials now is counteracting the technological advancements that the industry has made over the last decade or so,” said Daisy Jennings-Gray, Benchmark’s senior price reporter, at an in-person seminar organized by the group along with Red Cloud Securities at the Omni King Edward Hotel on Apr. 26.  

“We have seen multiple Chinese cell manufacturers announce cost increases… and it’s expected that these will begin to be passed down more… to the electric vehicles and the end use of these raw materials,” she added.  

The demand for electric vehicles in the last few years as the world looks to meet its decarbonization goals. But the supply crunch in metals needed to make batteries for EVs, such as lithium, nickel and cobalt, have led to skyrocketing prices of these metals.  

Lithium deficit 

According to Gray the world is already witnessing a deficit of lithium supply, which is likely to continue after 2030 despite an increase in the number of lithium projects around the globe. “We are starting to witness encouraging investment… some existing projects accelerate as well… but there still won’t be enough to meet the demand we are expecting to see downstream,” said Gray.  

Andy Miller, Benchmark’s COO, echoed a similar sentiment and said that the industry’s ability to “turn on the tap” to bring new material to the market in a very short time frame was limited. “Even in the best case scenario we are facing structural issues in lithium for at least the next two or three years… and that’s story isn’t unique to lithium,” he said.  

Graphite, which had a balanced supply and demand picture until 2020, has also seen a supply deficit open up, which is only likely to worsen by 2030, according to Benchmark. While there’s currently enough supply of cobalt, the metal is likely to witness a deficit by the end of the decade as well.  

The situation with nickel is a bit more complex, says Gray, as the metal has a market of about 200 million tonnes, which is significant compared to other battery metals. However, the metal did see its price skyrocket at the London Metal Exchange last month after Russia, one of the world’s largest exporters of nickel, launched its attack on Ukraine.  

The market has also seen a “swing supply” from nickel matte, which has ESG concerns, and cannot be considered as a guaranteed source of supply, said Gray. The metal isn’t immune to the supply issues and there will be questions regarding its availability by the end of the decade, the analyst added.  

As a consequence of the increasing raw material prices, “a lot of people” in the supply chain have started to consider the idea of “demand destruction,” said Gray.  

“This could eventually mean that the end user is resistant to price hikes and we start to see a retreat to an amount of demand,” said Gray, adding that that won’t happen before a “real increase” in downstream demand.