EV market fluctuations cascade down the chain
The recent and unexpected decline in growth of electric vehicle sales has had a knock-on effect on the materials markets.
The fluctuation has underlined the risk associated with operating in the battery supply chain. Cathode manufacturing, for example, is highly capital intensive, with delicate chemistry, price risk, and challenging negotiations with suppliers and customers.
George Heppel, Head of Analysis, Battery Materials at BASF, cites the hypothetical example of a manufacturer that built a cathode plant to serve a car company which then pushed back its electrification plans by three years. “One of the biggest mistakes people make about this market is they say, everything’s going to be electric in 10 years’ time, therefore everyone’s going to be a winner,” he says. “The reality is that it’s so challenging.”
BASF’s response is to build cathode plants only when it has a direct customer. For mining company Sibanye Stillwater, the answer is to invest near its carbuilding customers, for example at its new lithium hydroxide plant in Finland, with the aim of attracting a proximity premium as well as a green premium.
“It’s not about looking just at metals,” explains the company’s Chief Commercial and Development Officer, Laurent Charbonnier. “It’s about looking at products and services and customers.”
“It’s not about just looking at metals; it’s about looking at products and services and customers.”
Laurent Charbonnier, Chief Commercial and Development Officer, Sibanye Stillwater
Legislation may speed major mining projects
For mining companies, capital intensity is compounded by complex and lengthy permitting processes, as well as negotiations with neighboring communities.
Anglo American’s Tzveta Tchorbadjieva, Executive Head of Regional Director Office, Americas, estimates it takes at least 15 years to bring a mine from drilling to first production. She points to the company’s Quellaveco mine: “We started producing in 2022; we concluded our dialogue table discussions with the communities in 2012. And there were many years preceding that of negotiations.”
Anglo American’s Finnish mine, Sakatti, was discovered 19 years ago and is not yet close to production. But Tchorbadjieva sees new EU legislation, designed to reduce Europe’s reliance on materials from third countries, as a potential boost to progress.“The Critical Raw Materials Act is a positive step in many ways,” she says. “We do hope that it will highlight the importance of Sakatti, and similar projects, for the delivery of materials which are very much required generally, but also in the region.”
“The Critical Raw Materials Act is a positive step in many ways.”
Tzveta Tchorbadjieva, Executive Head of Regional Director Office, Americas, Anglo American
Future demand will put pressure on metals production
EV growth may have dipped for now, but projected long-term demand will still put strains on metal production.If EV penetration were to hit 40 to 45% by 2040, this would mean a five-fold increase in lithium demand over today’s levels, Tchorbadjieva notes.
“For battery nickel, it could be three-fold degrees. For copper, it could mean from today’s demand of 25 million tons to about 40 million in 2040,” she adds.
In the short term, concerns about lithium shortages have subsided, with big supplies from Africa balancing the market. However, nickel costs are high, and Indonesian production has been linked with risks to the environment and to workers’ health.
“Nickel is probably our biggest concern,” says Heppel. “I’d say we’re not necessarily going to run out of any of these metals any time soon, but the concerns still remain about securing metal at a reasonable price and managing the ESG risks.”
“We’re not necessarily going to run out of any of these metals any time soon, but concerns remain about securing metal at a reasonable price and managing the ESG risks.”
George Heppel, Head of Analysis, Battery Materials, BASF
Producers sign up to traceability
These risks will be laid bare as the battery chain faces new levels of transparency. From 2027, all EVs sold into the EU will require a battery passport, including a carbon footprint per battery. The Inflation Reduction Act in the U.S. requires similar information.
Circulor specializes in traceability in complex industrial supply chains, which for EVs means “tracking rock to car”, says its CEO, Douglas Johnson-Poensgen. He sees the new regulations as a step towards league tables that will allow consumers to buy on the basis of sustainability.
Manufacturers, including those in China, are preparing for the new requirements. “There are very, very few actors in the supply chain who have refused to participate in traceability,” Johnson-Poensgen says.
Data gathering from the supply chain is challenging but effective: “The data doesn’t come from humans. There’s no questionnaires at all. It’s coming directly from IoT devices or machines or manufacturing execution systems – and they don’t lie.
“Light is a great disinfectant. That disinfectant is coming.”
“Light is a great disinfectant. That disinfectant is coming.”
Douglas Johnson-Poensgen, CEO, Circulor
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