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can the lithium ion supply chain expect in the 2020s?","2020-vision-what-can-we-expect-in-this-decade-for-the-lithium-ion-supply-chain","article/2020-vision-what-can-we-expect-in-this-decade-for-the-lithium-ion-supply-chain",{"_uid":557,"date":558,"tags":559,"editor":560,"content":570,"excerpt":898,"featured":50,"reporter":899,"_editable":903,"component":904,"seo_title":553,"categories":905,"visibility":909,"author_company":49,"featured_image":910,"seo_description":898,"author_full_name":49,"author_job_title":49,"formattedDate":915,"formattedArticleDate":916},"3b346304-951c-4d90-82a8-c16d3c0e2137","2020-05-08 00:00",[],[561],{"slug":562,"name":563,"content":564},"didi-bostock","Didi Bostock",{"job_title":565,"image":566,"bio":568,"linkedin":569},"Editor - Energy Transition & Economics",{"filename":567},"https://a.storyblok.com/f/287943243085208/512x512/2c5ca5c1a3/didi-bostock.jpeg","Didi is the Energy Transition & Economics Editor at Benchmark, covering a broad range of markets across the energy transition. His remit spans from downstream sectors such as BESS and EVs, through to midstream such as new technologies and battery production, to upstream critical minerals mining. He also leads on financial analysis across these supply chains, alongside in-depth policy analysis.\n","https://www.linkedin.com/in/didi-bostock-656342198/",{"type":571,"content":572},"doc",[573,580,585,590,597,602,607,612,617,622,627,632,635,640,645,650,655,660,665,669,680,685,690,695,698,702,707,712,717,722,727,732,737,742,747,751,756,761,765,770,775,779,784,789,793,800,805,810,813,818,823,828,833,838,843,848,853,858,863,868,873,878,883,888,893],{"type":574,"attrs":575,"content":576},"paragraph",{"textAlign":49},[577],{"text":578,"type":579},"In this deep-dive Q&A into the lithium ion battery supply chain Benchmark Minerals’ Product Director, Andrew Miller, provides a detailed look into how raw material markets adapted to the new supply chain realities through the 2010s and the changes we can expect in the 2020s.","text",{"type":574,"attrs":581,"content":582},{"textAlign":49},[583],{"text":584,"type":579},"In this new environment how have markets changed for lithium, graphite, cobalt and nickel? What can we expect in battery raw materials for the rest of 2020? How has the coronavirus affected Benchmark’s medium-term and longer-term forecasts? What are the major cathode and anode trends that will shape the future of these markets?",{"type":574,"attrs":586,"content":587},{"textAlign":49},[588],{"text":589,"type":579},"Read on as Andrew Miller explains the critical development drawing on Benchmark’s extensive forecasting sets and proprietary data.",{"type":591,"attrs":592,"content":594},"heading",{"level":593,"textAlign":49},4,[595],{"text":596,"type":579},"What have the major supply and demand trends been in battery raw materials over the last 5 years?",{"type":574,"attrs":598,"content":599},{"textAlign":49},[600],{"text":601,"type":579},"Across the board you’ve started to see the emergence of battery demand disrupting some of the traditional industrial applications for lithium, cobalt, graphite and nickel. To different degrees you’ve also seen a period of price volatility that’s come off the back of that.",{"type":574,"attrs":603,"content":604},{"textAlign":49},[605],{"text":606,"type":579},"These changes from battery consumption have come from relatively low demand growth compared with what we’ll see over the next few years. But it’s disrupted what was quite an inflexible supply structure in each of these markets and exposed the fact that to bring new resources into production can take a very long time and can’t be achieved as rapidly as battery demand would dictate.",{"type":591,"attrs":608,"content":610},{"level":609,"textAlign":49},6,[611],{"text":8,"type":579},{"type":574,"attrs":613,"content":614},{"textAlign":49},[615],{"text":616,"type":579},"The big development on the lithium supply side is that to bring new supply to the market quickly, you’ve seen the emergence of hard rock resources as the quicker source of new supply. The speed to bring that to market is a lot quicker than brine resources and it’s also typically been located in more mining-friendly jurisdictions – so you haven’t had some of the permitting issues that you’ve had in areas like Chile for the brine side of things. Australia has been more accommodating and elsewhere lithium mining has also opened up, for instance in Brazil.",{"type":574,"attrs":618,"content":619},{"textAlign":49},[620],{"text":621,"type":579},"Over the past few years we’ve therefore seen a shift in the balance of supply away from brine as the primary source of feedstock into the lithium market, which was widely accepted to be the lower cost source of material.",{"type":574,"attrs":623,"content":624},{"textAlign":49},[625],{"text":626,"type":579},"On the back of increasing battery demand, there was a need to bring supplies to the market more quickly, which boosted new spodumene operations and we’ve seen spodumene becoming the leading feedstock into the lithium market today.",{"type":574,"attrs":628,"content":629},{"textAlign":49},[630],{"text":631,"type":579},"You’ve also seen some development on the cost curve as new demand has been created and the shift in battery technology has developed. With these technological shifts there tends to be favour towards high nickel cathodes from western OEMs and that means there is the need for a higher proportion of lithium hydroxide required. That’s important in cost terms because the common theory that brine is the lower cost source for lithium chemicals was largely tied to the production of lithium carbonate. If you can produce lithium hydroxide directly from spodumene it becomes more cost competitive with brine. So, in terms of new supply and how that’s emerged, you’ve really seen these two supply chains diverging from each other and start to position themselves to supply different subsections of the battery market.",{"type":574,"attrs":633,"content":634},{"textAlign":49},[],{"type":591,"attrs":636,"content":637},{"level":609,"textAlign":49},[638],{"text":639,"type":579},"Graphite",{"type":574,"attrs":641,"content":642},{"textAlign":49},[643],{"text":644,"type":579},"For graphite, the biggest development story for supply is that there has finally been some diversification of supply from outside of China. Historically China has supplied upwards of 70% of global production. With the emergence of operations outside of China, particularly with Syrah Resources mine in Mozambique, we are seeing a new competitive, low-cost, and high-volume source of flake graphite material. The competition for that new material has led China to look to maximise its own resources as well as looking to import material from elsewhere.",{"type":574,"attrs":646,"content":647},{"textAlign":49},[648],{"text":649,"type":579},"The key thing in flake graphite now, which is different from five years ago, is that the market is becoming centred around value-add applications rather than traditional flake graphite concentrate markets.",{"type":574,"attrs":651,"content":652},{"textAlign":49},[653],{"text":654,"type":579},"While these markets still take up the majority of flake graphite demand, that is going to be very quickly eclipsed by demand from the battery market and high-value markets such as expandable graphite for instance, and different types of specialist applications.",{"type":574,"attrs":656,"content":657},{"textAlign":49},[658],{"text":659,"type":579},"The evolution of China’s role in the market has seen them move from being a low-cost exporter to the rest of the world’s value-added industries; to a point where it’s developed of its own domestic value-added market. More flake graphite than before is staying within China and it’s also starting to require more material from outside of its borders.",{"type":574,"attrs":661,"content":662},{"textAlign":49},[663],{"text":664,"type":579},"What that ultimately means is the rest of the world will no longer be able to rely solely on China for the source of low cost material for its value-added own purposes, and because of that we’re going to see a push for diversification and more mines will need to be developed outside of China.",{"type":591,"attrs":666,"content":667},{"level":609,"textAlign":49},[668],{"text":115,"type":579},{"type":574,"attrs":670,"content":671},{"textAlign":49},[672,674,676,678],{"text":673,"type":579},"There hasn’t been a huge evolution in supply terms in the cobalt market. You’ve seen the need to develop new resources and you’ve also seen that bringing new supply to the cobalt market has possibly been the most challenging tasks in the whole battery supply chain. Ultimately because you’re dependent on the production of cobalt as a by-product and with the composition of different resources around the world that have cobalt assets, the DRC (Democratic Republic of the Congo) is ultimately the central player in that supply chain and in ",{"text":675,"type":579},"Benchmark’s Cobalt",{"text":677,"type":579},"Forecast ",{"text":679,"type":579},"is going to remain the central player.",{"type":574,"attrs":681,"content":682},{"textAlign":49},[683],{"text":684,"type":579},"Other areas of development in terms of the supply structure for cobalt is how companies can grasp and get control of the sustainability of their supply chains. That has been a huge issue over the past five years, especially following the fallout following Amnesty International’s report which highlighted the involvement of artisanal sourced cobalt in the supply chains of a number of major tech and auto companies.",{"type":574,"attrs":686,"content":687},{"textAlign":49},[688],{"text":689,"type":579},"Since the Amnesty report, a huge amount of effort has gone into understanding the supply chains in the DRC. Now you have big international bodies, such as the World Economic Forum, as well as leading end-users such as Samsung, Volkswagen and BMW, who are now looking at how to make the DRC supply chain more sustainable while trying to add some diversification of supply outside of the DRC.",{"type":574,"attrs":691,"content":692},{"textAlign":49},[693],{"text":694,"type":579},"It’s not that there is no production outside the DRC, but to meet the type of growth levels that are going to be needed from cobalt over the coming years, there’s going to have to be more production from the DRC and more recycled sources of cobalt coming back into the supply chain.",{"type":574,"attrs":696,"content":697},{"textAlign":49},[],{"type":591,"attrs":699,"content":700},{"level":609,"textAlign":49},[701],{"text":151,"type":579},{"type":574,"attrs":703,"content":704},{"textAlign":49},[705],{"text":706,"type":579},"The big development in nickel has been that any expansions at a raw material level have been centred around laterite expansions. That is important because from a battery supply chain perspective, you’d typically like to source your nickel from nickel sulphides, as these would be higher-quality and lower-cost sources.",{"type":574,"attrs":708,"content":709},{"textAlign":49},[710],{"text":711,"type":579},"But sulphide resources aren’t being developed or aren’t available, so laterites and particularly those in Indonesia, have been and will continue to be central going forward in bringing volumes to market.",{"type":574,"attrs":713,"content":714},{"textAlign":49},[715],{"text":716,"type":579},"At a refined nickel level the role of Indonesia and the role of laterites is going to be central and will be the driving force of expansions in the nickel market.",{"type":574,"attrs":718,"content":719},{"textAlign":49},[720],{"text":721,"type":579},"The big question when you work down the nickel supply chain is what is the favoured type of feedstock for nickel sulphate production? It’s not impossible to produce sulphate from laterites, there is just some additional cost, but if you can start to process some of the intermediates in that supply chain — depending on whether they’re trading at a premium or a discount to the metal price — it will ultimately dictate the economics of taking nickel from that side of the supply chain and producing nickel sulphate.",{"type":574,"attrs":723,"content":724},{"textAlign":49},[725],{"text":726,"type":579},"The issue with nickel is less at a mining level and more at a refining level and how you can develop supply chains for the various different types of refined nickel products and how the costs of using each one of those products stacks up when you talk about taking it to nickel sulphate.",{"type":574,"attrs":728,"content":729},{"textAlign":49},[730],{"text":731,"type":579},"Nickel is slightly different from the rest of the battery raw materials industry in that it is from a much bigger commodity market. But what you really want to focus on and the area under the most scrutiny and under the most pressure from the rise of battery demand is nickel sulphate and the various supply chains into that part of the market.",{"type":591,"attrs":733,"content":734},{"level":593,"textAlign":49},[735],{"text":736,"type":579},"What can we expect in battery raw materials for the rest of 2020?",{"type":574,"attrs":738,"content":739},{"textAlign":49},[740],{"text":741,"type":579},"We’re seeing more of an impact from the fallout from the coronavirus pandemic on the demand side rather than the supply side. We expect that demand this year is going to be derailed to a certain extent. That’s not going to impact the longer-term trajectory of the battery industry but it will impact the shape of that demand escalation particularly through 2020 and likely through into 2021.",{"type":574,"attrs":743,"content":744},{"textAlign":49},[745],{"text":746,"type":579},"From a raw materials standpoint —and it differs across different geographies and different parts of the market —we haven’t seen operations impacted to the extent that there will be a material deficit in terms of supply of raw material. The bigger issue at the moment is how quickly can operations be ramped up given that there’s likely to be a continued low-price environment across battery raw materials. This could make it incredibly difficult to fund and develop new resources in the timeframes that are going to be needed over the next three to four years.",{"type":591,"attrs":748,"content":749},{"level":609,"textAlign":49},[750],{"text":8,"type":579},{"type":574,"attrs":752,"content":753},{"textAlign":49},[754],{"text":755,"type":579},"For lithium, a low-price environment was already in place after the fall off in pricing during 2018 and 2019. Coming into this year a lot of higher-cost operations had already come offline, as a lot of new spodumene operations were struggling under the operations on the market. This environment will put continued pressure on those projects and likely force more of them to remain closed for a longer period of time.",{"type":574,"attrs":757,"content":758},{"textAlign":49},[759],{"text":760,"type":579},"That will ultimately impact the lithium market balance because you had a backlog in the raw material end of the lithium supply chain at the tail-end of 2019. We were expecting that backlog to be worked by the middle of this year, but it looks likely that will linger in the market for longer because you’re not going to have the ramp-up of converters in China that suspended operations. You’ll also have Australian spodumene suppliers who’ll have to maintain some production and cashflow to remain in business, so you’ll continue to see shipments from those new spodumene operations even though there’s not huge demand growth in the Chinese market this year.",{"type":591,"attrs":762,"content":763},{"level":609,"textAlign":49},[764],{"text":639,"type":579},{"type":574,"attrs":766,"content":767},{"textAlign":49},[768],{"text":769,"type":579},"China is developing its own domestic graphite industry in response to its new value-added capacity that I mentioned before. It has also been keen to maintain a dominant position in the graphite market despite the development of new resources elsewhere in the world.",{"type":574,"attrs":771,"content":772},{"textAlign":49},[773],{"text":774,"type":579},"When you look at the ramp-up of those operations following a period in Q1, when production typically is offline anyway, you’re not seeing too much material impact on the targets China are setting for their production in 2020. What that’s ultimately going to mean is that you’re likely to see an overhang of supply in the market again in 2020, particularly if battery demand doesn’t grow at the rate that was expected. More importantly, some of those traditional industrial end markets could fare badly over the coming 12-18 months due to the wider macro environment. That will increase the oversupply in the market for 2020 unless you see significant cutbacks in Chinese production.",{"type":591,"attrs":776,"content":777},{"level":609,"textAlign":49},[778],{"text":115,"type":579},{"type":574,"attrs":780,"content":781},{"textAlign":49},[782],{"text":783,"type":579},"There hasn’t been a huge impact from a supply side on the cobalt market from a mining perspective. But the important area to look at is the distribution of the raw material from the DRC and the supply chains from out of the DRC for that material to be refined and to make its way into the battery supply chain. The cobalt market has shown over the past few years that it’s pretty flexible to changes in demand and you’re likely to see more cutbacks in the cobalt market — you’ve already seen some come offline and reduce their volumes.",{"type":574,"attrs":785,"content":786},{"textAlign":49},[787],{"text":788,"type":579},"We expect the cobalt market to be in oversupply this year but it’s looking slightly more balanced than other raw materials because of its flexibility of supply. In the short-term, it’s more a logistics issue in getting material out of the DRC. In terms of our forecast numbers for this year, the cobalt market will likely respond to demand drop offs by lowering output from some of the major producers in the DRC, but also other parts of the world.",{"type":591,"attrs":790,"content":791},{"level":609,"textAlign":49},[792],{"text":151,"type":579},{"type":574,"attrs":794,"content":795},{"textAlign":49},[796,798],{"text":797,"type":579},"The big thing in terms of our nickel numbers and where we’re expecting to see most disruption is the development of HPAL (high pressure acid leaching) projects in Indonesia. These projects are going to be central to nickel’s expansion in the next few years and there were some very encouraging signs at the start of the year with some of the permits being given and there were hopes that some",{"text":799,"type":579},"of those projects would be pushed forward.",{"type":574,"attrs":801,"content":802},{"textAlign":49},[803],{"text":804,"type":579},"But if you look historically at HPAL projects they don’t have a huge degree of success and some of the challenges — both technically and ramping up to the volumes they are targeting — will likely be delayed by coronavirus shutdowns.",{"type":574,"attrs":806,"content":807},{"textAlign":49},[808],{"text":809,"type":579},"Shutdowns haven’t been prominent so far but are likely to kick in during Q2. You’re also going to see the wider macro pressures slowing capital going into new projects, and that will hinder some of the new developments in the market that are going to be needed to meet nickel sulphate demand by 2023 and 2024.",{"type":574,"attrs":811,"content":812},{"textAlign":49},[],{"type":591,"attrs":814,"content":815},{"level":593,"textAlign":49},[816],{"text":817,"type":579},"How has the coronavirus affected medium- and long-term forecasts?",{"type":574,"attrs":819,"content":820},{"textAlign":49},[821],{"text":822,"type":579},"Broadly, where we’re expecting the biggest impact in short-term is logistics of material to market. Not a huge bottle neck in terms of volumes. What we’re really projecting and what are forecast models are showing is that the medium-term outlook for demand growth from the battery sector across all these markets will be disrupted. The positive of that is that China is still a large part of demand and we expect to see more positive signs from the Chinese in the second half of the year from the Chinese market.",{"type":574,"attrs":824,"content":825},{"textAlign":49},[826],{"text":827,"type":579},"But that diversification of demand from a China-centric story, moving to Europe and China for instance will be delayed as a result of this.",{"type":574,"attrs":829,"content":830},{"textAlign":49},[831],{"text":832,"type":579},"You will have other factors on the demand side, like I say demand from those industrial markets not growing and some of them contracting for this year. And that will impact the market balance for all four minerals for this year and into next year.",{"type":574,"attrs":834,"content":835},{"textAlign":49},[836],{"text":837,"type":579},"On the battery demand side, we are still projecting an upward correction in the market that is likely to bring battery demand growth back on track to where it was likely to be by the 2023-2024 sort of time frame.",{"type":574,"attrs":839,"content":840},{"textAlign":49},[841],{"text":842,"type":579},"The bigger issue from the supply side is that if you look longer term. The bigger impact on our models is what do the wider macro-economic constraints mean for the funding of new projects. We were already at a more volatile time for each of these minerals in the sense that you needed a huge amount of investment over the next 12-18 months to start meeting the demand we’re projecting for that 2023 and 2024 time horizon. If those growth rates stay in place then the industry has an even bigger job to do to meet growing demand.",{"type":591,"attrs":844,"content":845},{"level":593,"textAlign":49},[846],{"text":847,"type":579},"Looking further downstream, what are the major anode trends you expect going forward?",{"type":574,"attrs":849,"content":850},{"textAlign":49},[851],{"text":852,"type":579},"The trend we’re still projecting long-term from our forecasts is that you’re going to have a higher proportion of natural graphite being used in your anode blends. Where we are today, which is where we’ve been for the past few years, is that China has been a very dominant force in terms of demand and the rise of Chinese anode production capabilities have meant that the industry has tended towards using synthetic graphite. The key reason behind that is because of the stability of material allows Chinese producers to produce a more consistent product and a more reliable anode material.",{"type":574,"attrs":854,"content":855},{"textAlign":49},[856],{"text":857,"type":579},"Now that’s not to say that it’s the optimum requirement for the anode. You have energy density requirements, performance requirements and of course life cycle requirements. What leading anode producers in the industry have today discovered is that by using a blend of those two materials —synthetic and natural graphite and in some cases with additives like silicon — has been shown to get the optimal performance depending on which application you’re talking about.",{"type":574,"attrs":859,"content":860},{"textAlign":49},[861],{"text":862,"type":579},"So longer term we see that blending being common place across the market. And ultimately that blend tending towards — particularly for your western OEMs — a more natural dominant blend in your anode. Longer-term we’re still forecasting a more even split in the market and we’re really only expecting the widespread emergence of other types of materials like pure silicon, like lithium anodes, really from post 2030. There’s going to be a huge lead time to develop those technologies, whether they’re going to be silicon or lithium dominant anode types.",{"type":574,"attrs":864,"content":865},{"textAlign":49},[866],{"text":867,"type":579},"We expect in the shorter-term China’s dominance in the anode space to continue, and therefore the prevalence of synthetic graphite anodes will continue and for the transition to the blend of natural and synthetic graphite to be delayed.",{"type":591,"attrs":869,"content":870},{"level":593,"textAlign":49},[871],{"text":872,"type":579},"Likewise, what are the major cathode trends you expect going forward?",{"type":574,"attrs":874,"content":875},{"textAlign":49},[876],{"text":877,"type":579},"The biggest trend over the past 18 months or so has been the slower than expected growth in high nickel cathodes and the more robust growth of LFP (lithium iron phosphate) which many thought would be transitioned out of the industry.",{"type":574,"attrs":879,"content":880},{"textAlign":49},[881],{"text":882,"type":579},"We have always been more conservative on our outlook for high nickel cathodes, predominantly because of the additional capital required to introduce that production capacity and the technological constraints that still have to be worked through before you can have widespread implementation of high nickel, NCM 811 (nickel, cobalt, manganese) or NCA (nickel, cathode, aluminium) cathode types. That’s not to say there hasn’t been growth in that part of the market, but it’s been limited to a small group of suppliers who are able to execute production of those type of cathode chemistries.",{"type":574,"attrs":884,"content":885},{"textAlign":49},[886],{"text":887,"type":579},"Where we’ve seen more growth is obviously with the growth for demand in passenger electric vehicles. There is still a huge amount of growth in the NCM cathode variations but this will typically be in lower nickel cathodes such as 622 or 523, so working towards those mid-nickel cathode variations. As I mentioned before, LFP has played a really important role in the past couple of years and has got a lot of attention in terms of some of improved energy density capabilities that have been demonstrated by companies like BYD and CATL more recently.",{"type":574,"attrs":889,"content":890},{"textAlign":49},[891],{"text":892,"type":579},"We’re forecasting that the shift towards high nickel will be a slow transition – that’s something we’d always forecast and been in line with. Where we’ve increased some of our numbers is on the LFP side of the market. Although we were always confident LFP would play a big role in certain transportation capabilities – particularly in heavy duty and e-buses.",{"type":574,"attrs":894,"content":895},{"textAlign":49},[896],{"text":897,"type":579},"LFP is also benefitting from the emergence of ESS (energy storage systems) where you don’t have the same type of requirements as you do for a vehicle. LFP is likely to be a very prominent cathode type for the lithium ion that’s used in those applications. With the greater than expected rise in ESS projects and systems across the world over the past 12 months or so, and where we expect that to continue going the next couple of years, we will see a boost to LFP demand and see it hold a much larger proportion of the market than many were expecting. It’s still a small part of the market when you talk about stationary but it’s an important driver in terms of the cathode split.","In this deep-dive Q&A into the lithium ion battery supply chain Benchmark Minerals’ Product Director, Andrew Miller, provides a detailed look into how raw material markets adapted to the new supply chain realities through the 2010s and the changes we can expect in the 2020s. In this new environment how have markets changed for lithium, […]",[900],{"slug":562,"name":563,"content":901},{"job_title":565,"image":902,"bio":568,"linkedin":569},{"filename":567},"\u003C!--#storyblok#{\"name\": \"article\", \"space\": \"\", \"uid\": \"3b346304-951c-4d90-82a8-c16d3c0e2137\", \"id\": \"\"}-->","article",[906],{"slug":907,"name":908},"batteries","Batteries","private",{"id":49,"alt":911,"name":911,"focus":911,"title":911,"source":911,"filename":912,"copyright":911,"fieldtype":913,"meta_data":914,"is_external_url":51},"","https://a.storyblok.com/f/287943243085208/e7b3399633/bm-benchmarks-2020-vision.jpg","asset",{"alt":911,"title":911,"source":911,"copyright":911},"May 08, 2020","8th May 2020",[],[],1789748876872]