The surge in electric vehicles and growing demand for rechargeable batteries have prompted movements in the markets of battery metals such as cobalt, lithium, copper and nickel. In 2019, we have seen volatility in the industry metals space as the equilibrium between supply and demand is still adjusting.
The prospect of growth in electric vehicle production and the increase in battery-powered technologies are shaping the 2020 forecasts for the battery metals market. These metals are considered by some analysts as ‘the new oil’ and promise to become even more significant as sustainability goals take on increasing importance internationally.
Last year, global sales of electric vehicles were up 64% from 2017. In this space, the European market is expected to witness strong demand growth, says Fitch. Growing demand for cobalt, nickel and lithium will the strongest across Europe, in comparison to the US, pushed by favourable policy making in the EU.
German car manufacturer Volkswagen is committed to spend €60 billion on projects for electromobility and digitisation and R&D.
“We will step up the pace again in the coming years with our investments. Hybridisation, electrification and digitalisation of our fleet are becoming an increasingly important area of focus. We intend to take advantage of economies of scale and achieve maximum synergies,” VW boss Herbert Diess said
Lithium: Beyond electric cars
Lithium is one of the most fundamental components of the batteries that power electric cars. In 2019, the lithium market has not been particularly positive due to rapidly increasing supply, so analysts remain cautious about projections into 2020. Even though major lithium companies have reported increase in number of sales like Albermarle, some believe the market could become oversupplied.
Meanwhile, other metal analysts see an opportunity on the horizon with the advent of 5G in China, says SMM News Metal. 5G stations require a lot more power supply to run compared to their 4G cousins reflected in the size and weight of the batteries needed to power this new generation of station.
Main cities in China like Shanghai and Shenzhen are expected to reach full 5G coverage by 2020; while others like Beijing, Guangzhou and Wuhan are said to have targeted 5G coverage at urban areas by 2021.
Another point that could keep lithium prices up is the fact that there is no alternative to the metal and there will be no practical alternative to replace it for the next 5 years, says Resource Capital.
Cobalt: Production slowing down to keep prices up
Research firm Antaike has reported that global cobalt output should decelerate in 2020, according to Reuters. The firm also predicts an increase in cobalt prices in 2020 at around $18 per pound, up from an average of $16 to $16.50 per pound in 2019.
Cobalt prices reached their peak in 2018; giant Glencore expects the market to balance in about two years. In August, the company announced the closing of its mine Mutanda, in the Democratic Republic of Congo (DRC), for two years to control output.
Global consumption is estimated to grow around 6.6 percent in 2019.
Palladium: Industry applications and safe-haven asset
Palladium has so far been the best performing precious metal in 2019, surging more than 40 percent since January — more than double the gains of gold, silver or platinum. Last month, the price of palladium hit its all-time high of $1804 an ounce.
Palladium is a rare and versatile asset: it has many industrial applications and is also considered a safe haven asset for investors.
75 percent of palladium use is directed to hybrid vehicles and in the catalytic converters used in autos to reduce emissions. At the moment, palladium supply is not able to respond to growing demand, especially from the Chinese market, which is the biggest global auto market. A further push in demand can also come from the industrial use of palladium to substitute rhodium, a much more expensive metal.
“Looking into 2020, from a fundamental point of view, palladium has the most constructive outlook. Palladium has been in deficit for the past seven years and we are forecasting a deficit in 2020 and 2021. The market is structurally undersupplied,” Standard Chartered Precious Metals Research executive director Suki Cooper said to Kitco News.
Company to watch
St Georges Eco-Mining (CSE:SX) is a Canadian-listed company focused on base metals and eco-mining with assets in Canada and Iceland. St Georges’ strategy is to leverage on its new lithium technologies to make mining more sustainable, involving less waste and fewer chemicals. St Georges is at the forefront of smart mining and technology development, deploying innovative tools to make mining operations more effective while reducing the environmental impact.
The company has completed a transaction for its Canada-based gold project Kings of The North with the London-listed entity BWA Group and is itself looking to enter the London space soon.
Watch the company presentation