{"id":2170,"date":"2023-10-17T04:10:12","date_gmt":"2023-10-17T04:10:12","guid":{"rendered":"https:\/\/infundpros.com\/business\/weak-chinese-ev-demand-drives-down-battery-metal-prices\/"},"modified":"2023-10-17T04:10:12","modified_gmt":"2023-10-17T04:10:12","slug":"weak-chinese-ev-demand-drives-down-battery-metal-prices","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=2170","title":{"rendered":"Weak Chinese EV demand drives down battery metal prices"},"content":{"rendered":"<div>\n<p>Unlock the Editor\u2019s Digest for free<\/p>\n<p class=\"article__content-sign-up-topic-description\"><span>Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.<\/span><\/p>\n<p><iframe class=\"article__content-sign-up-iframe close\" scrolling=\"no\" id=\"signUpIframe\" data-prev-url=\"\/register\/in-article-sign-up?ft-content-uuid=861d4097-1d8c-4692-a8bb-37d66a80a47b\"><\/iframe><\/div>\n<div id=\"article-body\">\n<p>Prices for key battery materials such as lithium, cobalt and nickel have fallen sharply this year as electric vehicle sales in China cool off and a surge in supply hits the market.<\/p>\n<p>Since the start of the year, lithium prices have fallen almost 70 per cent and nickel prices have dropped by 40 per cent, while the cobalt market is in a glut with prices hovering slightly above record lows, according to data from Benchmark Mineral Intelligence, Refinitiv and Argus.<\/p>\n<p>Much of the fall is driven by a slowdown in the growth of demand for fully electric cars in China. Sales doubled in the first nine months of 2022 over the same period the previous year, but that rate of growth has slowed to 25 per cent this year.<\/p>\n<p>\u201cIt\u2019s the EV market decelerating,\u201d said Martin Jackson, head of battery raw materials at CRU Group, a consultancy. \u201cOn top of that, consumer electronic sales in China declined double digits last year and we\u2019re forecasting another double digit contraction this year.\u201d <\/p>\n<figure class=\"n-content-image n-content-image--full\"><picture><source media=\"(min-width: 700px)\"  width=\"1400\" height=\"1000\"><\/source><source media=\"(max-width: 490px)\"  width=\"600\" height=\"800\"><\/source><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/10\/https:\/\/d6c748xw2pzm8.cloudfront.net\/prod\/f76966e0-68ea-11ee-923f-d549c851b63b-standard.pn.png\" alt=\"Column chart of '000 units showing Chinese EV sales cool off this year\" data-image-type=\"graphic\" width=\"1400\" height=\"1000\"><\/picture><\/figure>\n<p>However, other commodity strategists said that the price falls represented more of a return to normality from the hype that had pushed battery metal markets into overdrive in the last couple of years.<\/p>\n<p>The fall in raw material prices will have come as a relief to car companies and battery manufacturers that suffered an increase in cell prices last year for the first time in well over a decade.<\/p>\n<p>Lithium prices, which had never previously risen above $25,000 per tonne, began a huge rally in mid-2021 that took them to a peak above $80,000 at the end of 2022. Now they have fallen back to $23,000 per tonne.<\/p>\n<p>\u201cThis is really irrational exuberance of 2021-22 reversing rather than some kind of massive doom and gloom setting in,\u201d said Benjamin Hoff, global head of commodities research at Soci\u00e9t\u00e9 G\u00e9n\u00e9rale. <\/p>\n<p>The price swings highlight how battery material markets are experiencing violent peaks and troughs, as miners try to increase production quickly to meet an expected surge in demand for electric vehicles over the coming decade.<\/p>\n<figure class=\"n-content-image n-content-image--full\"><picture><source media=\"(min-width: 700px)\"  width=\"1400\" height=\"1000\"><\/source><source media=\"(max-width: 490px)\"  width=\"600\" height=\"800\"><\/source><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/10\/https:\/\/d6c748xw2pzm8.cloudfront.net\/prod\/45602ca0-68ee-11ee-a727-ab933fd5cdf3-standard.pn.png\" alt=\"Line chart of $ per tonne showing Lithium prices come back down to earth\" data-image-type=\"graphic\" width=\"1400\" height=\"1000\"><\/picture><\/figure>\n<p>Sarah Maryssael, chief strategy officer at Livent, one of the world\u2019s largest lithium producers, said at the FT Mining Summit this month that raw material prices for electric vehicle batteries will \u201ccontinue to be volatile\u201d and \u201cthat is a natural part of the boom and bust cycle.\u201d <\/p>\n<p>She added that the challenge for automakers and miners trying to collaborate on scaling up supply quickly is \u201chow do you find price stability on both sides but also recognise that we\u2019re dealing with a scarce resource?\u201d<\/p>\n<p>The most recent price drop has been even more acute because the battery supply chain has been \u201cdestocking\u201d, which involves using stockpiled material to make batteries rather than buying new supply in, further lowering demand for raw materials. High financing costs owing to interest rate hikes have made it more expensive to hold on to raw material inventory.<\/p>\n<p>The fall in prices will help to reduce the cost of electric vehicles because the battery accounts for somewhere between one-fifth and one-third of the price of the car. However, raw material price drops can take months to feed through, depending on the contract terms between miners and customers.<\/p>\n<p>The price drops have also opened up a window for mining groups and others to execute mergers and acquisitions as price tags come down. <\/p>\n<p>On Monday, the world\u2019s largest lithium producer Albemarle walked away from its $4.3bn bid for Liontown Resources after Gina Rinehart, Australia\u2019s richest person, built up a strategic stake in the Australian miner. That followed an agreement for two lithium producers Allkem and Livent to merge in May in a $10.6bn deal. <\/p>\n<p>\u201cEven though lithium prices are coming down, M&amp;A in the space is coming as larger scale companies with financial firepower will be needed to deliver supply,\u201d said Reg Spencer, analyst at Canaccord Genuity.<\/p>\n<p>Cobalt prices, meanwhile, have been stung particularly hard because it is produced as a byproduct at copper and nickel mines in the Democratic Republic of Congo and Indonesia, making it hard for supplies to be cut back to balance the market when prices fall sharply.<\/p>\n<p>China\u2019s CMOC was banned from exporting copper and cobalt from its giant Tenke-Fungurume mine for 10 months until April this year. That created a huge stockpile of cobalt that its trading unit IXM is slowing pushing into the market, while its KFM mine began producing this year.<\/p>\n<figure class=\"n-content-image n-content-image--full\"><picture><source media=\"(min-width: 700px)\"  width=\"1400\" height=\"1000\"><\/source><source media=\"(max-width: 490px)\"  width=\"600\" height=\"800\"><\/source><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/infundpros.com\/wp-content\/uploads\/2023\/10\/https:\/\/d6c748xw2pzm8.cloudfront.net\/prod\/34daa720-6902-11ee-b59e-15d71b498c7f-standard.pn.png\" alt=\"Column chart of Supply vs demand (%) showing Battery metals expected to be oversupplied in coming years\" data-image-type=\"graphic\" width=\"1400\" height=\"1000\"><\/picture><\/figure>\n<p>\u201cCobalt is one of the worst markets I\u2019ve ever seen. I can\u2019t remember a similar level of oversupply,\u201d said Jim Lennon, senior commodities consultant at Macquarie. \u201cFor the next three or four years, the projected supply increase is almost double the market size.\u201d<\/p>\n<p>Analysts and executives at the London Metal Exchange\u2019s annual jamboree last week said that they expect the nickel and cobalt markets to be oversupplied for the next couple of years at a time when technological advances mean there is less need for these materials.<\/p>\n<p>But Lennon added that once the electric vehicle discount war in China passes and demand starts to tick up, then prices could rise like \u201ca coiled spring\u201d as manufacturers buy materials to both produce and replenish inventories.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.ft.com\/content\/861d4097-1d8c-4692-a8bb-37d66a80a47b\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Unlock the Editor\u2019s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter. Prices for&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[],"class_list":{"0":"post-2170","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Weak Chinese EV demand drives down battery metal prices | inFundPros<\/title>\n<meta name=\"description\" content=\"Unlock the Editor\u2019s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Prices for key battery\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/infundpros.com\/?p=2170\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta 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