Electric Vehicles Need Battery Metals Mining, Investing Opportunities Ahead

Demand for battery raw materials is outpacing supply by three to five times and is growing at a quicker rate as the world continues to push forward to reach net-zero goals.

By 2050, about 30 terawatt-hours of lithium-ion battery deployed capacity will be needed, according to Benchmark Mineral Intelligence. That means demand for key battery metals such as lithium will continue to increase.

“All these gigafactories around the world are being built without even thinking about building the mine capacity alongside. That’s now coming back to bite the industry quite hard,” Simon Moores of Benchmark Mineral Intelligence told the audience at the Vancouver Resource Investment Conference (VRIC), held at the end of January.

Back in 2015, Benchmark Mineral Intelligence was tracking just three gigafactories — today that number has risen to 350, of which 145 are active. “Lithium-ion batteries are getting better. They’re getting lower cost and they are abundant,” Moores said, adding that lithium-ion batteries are the number one technology for the energy transition.

He explained that if electric vehicles (EVs) are lithium-ion batteries, then lithium-ion batteries are minerals and metals. “A lot of mining will need to take place for this (energy transition to happen),” he said.

For Moores, the top priority is shrinking the distance between critical minerals mines and end markets. This trend is being driven by supply chain security, supply chain control and quality and building what Moores referred to as 21st century industries.

“That presents opportunities for everybody — for Canada as a country, and certainly opportunities for the US,” he said.

The Benchmark Mineral Intelligence CEO also talked about China’s role during his presentation at VRIC.

“China’s not a big mining country for our industry, but it does control the midstream and the downstream. And that’s really where the rest of the world lacks and is playing catch up,” Moores said.

If the world is to meet increasing demand for battery metals by 2035 without recycling, it will need 59 new lithium mines, 62 new cobalt mines and 72 new nickel mines.

“We are going into a new era where mining is at the center of driving this industry forward,” Moores said.

That’s why he thinks financing needs to “get serious about mining.” Over the past seven years, US$350 billion has been raised to produce battery cells. “Mining and refining has only really raised under US$100 billion of that … but it needs to raise three times what batteries are raising to actually keep pace and make this industry work,” Moores said.

Permitting is also a key issue to watch out for. It takes, on average, over 10 years to build a critical minerals chemical plant from scratch. In comparison, it takes less than two years to build a gigafactory and start making batteries.

“We call that the great raw material disconnect. That has to change,” Moores said. “Governments can’t claim they’re serious about net zero and EVs if they’re not completely reforming permitting, certainly for critical minerals mines, to actually make this happen.”

Battery raw materials to see supply constraints

Passenger EV sales are forecast to grow at a CAGR of 23 percent through to 2027, with lithium-iron-phosphate batteries expected to increase in market share, data from S&P Global Commodity Insights shows.

Key metals such as nickel, lithium and cobalt are experiencing different trends in the short term, but will see supply constraints in coming years. When it comes to nickel, volatility is dominating the sector — demand outpaced supply in 2021, leaving the market in a deficit that turned into a surplus in 2022 as Indonesia ramped up output and macroeconomic factors hit the space.

“Passenger EV demand for nickel-grade products is really going to start eating into that surplus in a couple of years. And that will provide support for nickel prices,” said Mark Ferguson of S&P Global Commodity Insights during a keynote presentation at the AME Roundup event, also held in Vancouver at the end of January.

For its part, lithium has jumped in price in the past year to 18 months, remaining at historically high levels. “What we’ve noticed in the past six months to nine months is that projects are starting to progress, starting to finish off those feasibility studies,” the director of metals and mining research noted. “But a lot of assets that are under construction are struggling to meet timelines.”

Meanwhile, cobalt supply is a Democratic Republic of Congo story, and it will continue to be at least over the next five years.

“Growth in cobalt supply from the DRC is going to push a larger surplus for cobalt this year, and the following year,” Ferguson said. “And after that, the rapidly rising passenger EV sales will start to push cobalt into deficit as well.”

For the expert, the cobalt market is in the middle of a price correction, but should see sustained prices.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

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