Lithium’s massive drop in price from 2022 has changed nickel’s role in the battery raw materials discussion, previously it was such that lithium was the main consideration for cathode and battery manufacturers as they try to gain provenance-based subsidies. An extended lithium salts price lull will give OEMs other options when considering the best approach to minimizing battery costs over the next two years and in receiving IRA subsidies.
Nickel has become the most important price component for manufacturers of high-nickel ternary batteries since October, and we can expect this to be the case until 2026 when the lithium supply and demand balance is expected to become more tenuous. We expect lithium prices to remain subdued for the foreseeable future as supply remains robust due to prices staying high enough to sustain spodumene production, while negative sentiment surrounding future supply conditions is expected to keep new mines on the horizon.
On the other hand, lithium is still by far the most important price component for producers of lithium phosphate batteries since neither the price of iron nor phosphate rock have the capacity to increase to a level on par with nickel, creating an industry split between which minerals are most important to different companies based on their desired chemistries, which will also be heavily split by region.
—“Battery Raw Materials Forecast 2024-2030”
2023 saw a return to form for lithium-ion battery pack prices, as they fell from $151/ kWh to $139/ kWh year-over-year. Falling lithium salt prices were fueled by sudden oversupply in the market, enabled by overstocking by Chinese converters. High inventories will subdue the price of lithium salts for the remainder of this year, at a minimum, with the potential to extend for longer if supply continues to expand at the rate it has over the last year.
Eventually though, brownfield lithium projects will hit maximum capacity and supply will have to rely on greenfield projects coming online to continue expanding, particularly following an extended period of low prices as seen in the last year, Rethink said.
Low prices pose an additional risk to the future supply landscape, which will be shown in prices from 2026/2027. Pack prices will continue to fall until 2026 or so, as raw material costs remain deflated and Chinese production continues to outpace Western efforts to develop a significant manufacturing base for automotive batteries.
While prices will continue to fall for consumers further fueling increased EV adoption, this will not be equal and there is the potential for government intervention through mutual tariffs to maintain high prices artificially as countries seek to protect their domestic manufacturing industries.
The European Union is the most at risk for this, Rethink said, as it is still yet to exclude Chinese supply unlike the US, and the region is still experiencing high energy costs due to the Russia-Ukraine war which will be reflected in higher pack costs for the region.
Policy will continue to be a key factor in determining raw material prices, with the US Inflation Reduction Act creating parallel markets for high-cost chemicals such as lithium salts and nickel sulfate as companies fight over the limited supply of compliant materials. This will allow producers to charge more for their product for an extended period, even during times of relative oversupply in the wider market for materials, as will be seen in the nickel markets.
Companies will quickly find that keeping supply chains simple through strategic choices in battery chemistry will pay dividends as value becomes increasingly focused on non-substitutable raw materials such as lithium. This will make it easier for companies to maintain eligibility for IRA subsidies further improving competitiveness, profitability, and therefore market share.
This report was made by contrasting Rethink’s expectations for global battery demand with future raw material supply forecasts, based on planned projects and the likelihood of these projects coming to pass considering current and future price dynamics. Rethink’s primary raw material supply forecast focused on lithium, due to the industry’s importance in this particular raw material market. For this, Rethink balanced demand against improving raw material consumption per kWh of lithium battery demand, which will be achieved through the innovations outlined in its last battery report.
Cost estimates were derived from available statistics and commodity prices while forward-looking statements have been made in the context of the changing supply and demand dynamic.
Technological and chemical changes were also considered in the calculation of cost, as energy densities are improving without proportional long-term cost implications. This report also assessed the approach of both the US and EU in developing domestic supply capabilities, how this is going to interact with international supply dynamics, and what potential geopolitical issues may change this.
Additional information as to the state of the battery raw material industry was gathered through conversations with producers and adjacent industry figures to better shape ideas like industry sentiment and the likelihood of policy changes from relevant governments.
