Very good weekend read.....I have highlighted (bold) what is relevant to LKE
THE BATTERY RAW MATERIAL CLASS OF 2021: PRICES RISE, AS EV UPTURN AND COMMODITY SUPERCYCLE LOOM22nd January 2021 Battery raw materials
The class of lithium ion battery and electric vehicle (EV) raw materials are all undergoing price rises as the industry braces for a demand jump in 2021.
THE BIGGEST MOVERS FROM BENCHMARK’S PRICE ASSESSMENTS IN DECEMBER 2020:
- Lithium carbonate EXW China up 12.9%
- Cobalt sulphate EXW China increased 3.2%
- Nickel sulphate EXW China rose by 6.4%
- Graphite -100, 90-93% C, FOB China up 13.2%
Benchmark’s Managing Director, Simon Moores explained:
“For this suite of battery raw materials, China acts as an early warning system for the rest of the world. Historically, price rises that occur in China are usually experienced in the rest of the world 3 to 6 months later.”
While rises remain in their infancy, there is growing evidence that the low-price environment for many battery raw materials is beginning to change.
Lithium prices in China flatted in the second half of 2020 and then showed their first sustained price rises in three years during the final quarter.
Key to all of this is the growth of electric vehicle and battery demand, which is creating a fundamental shift in the pricing dynamics of these raw materials. China has been leading the way with strong government support for the EV industry and its value chain. But as Moores explains, where China leads the rest of the world tends to follow.
With China’s and Europe’s EV markets defying fears of an extended coronavirus slump with a resurgence through H2 2020 which has continued into this year, Benchmark is expecting 2021 to be the strongest year yet for the lithium ion battery space since the prices rises of 2016 and 2017.
EV makers are continuing to ramp up production to meet new demand, only added to by the new Biden administration in the USA which is expected to focus on promoting EV growth to support its climate change ambitions.
The changes brought about by early EV adoption has already leading to a boom in demand for raw materials that feed into these supply chains, but the demand growth of the 2010s will look minor compared to the increases we will see this decade.
Lithium, nickel, cobalt, graphite, manganese, copper, and the rare earth oxides of neodymium and praseodymium are all directly tied to the growth of electric vehicles either via their use as a feedstock or a battery grade chemical.
COMMODITY SUPERCYCLE
It appears this class of raw materials are set to have a “double boost” in 2021 after Goldman Sachs declared the start of a new commodity super supercycle.
In a research note, extracts of which were published in this Reuters comment, Goldman said the wider commodity industry was at the “beginning of a much longer structural bull market”.
The report added: “Looking at the 2020s, we believe that similar structural forces to those which drove commodities in the 2000s could be at play.” Driving this, any new supercycle would need strong recoveries from the world’s two biggest economies following the coronavirus crisis, China, which has already begun to bounce back, and the USA.
As part of their recoveries, both countries will be looking to fast-track a form of green industrial revolution for which the lithium ion battery and electric vehicles are a central platform.
Moores explained: “The rarity of a commodity supercycle, together with a once in a generation growth for the electric vehicle and lithium ion battery blueprint around the world is a perfect storm for the suite of battery raw materials,” Moores said.
“18 months ago both were not being discussed in the same sentence. If Goldman Sachs is correct, this would coincide with the biggest growth spurt for the EV supply chain yet.”
