With nearly every forecast predicting higher battery use in the years ahead, especially lithium-ion batteries to power new and existing technologies largely in the automotive and consumer goods markets, demand for its component metals are set to soar, speakers at this year's Mines and Money conference said Monday.
This includes cobalt, nickel, manganese, graphite and, most importantly, lithium itself.
"Lithium-ion batteries are a game changer in the energy world," Alexa Capital's founder and former head of European clean-tech research at Jefferies, Gerard Reid, said Monday, declaring a "revolution not evolution" in the energy world.
At five times the energy density of lead batteries, lithium-ion batteries are already the battery of choice in mobile phones, laptops and every new electric vehicle and, according to Reid, they will also be the cheapest by 2020.
"Technological advances and cost reduction in the last two years have been remarkable and nothing short of a revolution," Reid said. "The main growth driver up to now has been consumer goods but what will take it to the next level is road transport."
Driven by consumer demands for energy efficiency and the industry's necessity to meet emissions targets, electric vehicle growth has accelerated in recent years, up 55% on the year to around 700,00 vehicles in 2016.
This still only accounts for less than 1% of the 80 million vehicles sold globally each year, yet there are signs that this could change rapidly.
The world's largest vehicle manufacturer, Volkswagen, estimates it will be producing 2 million-3 million electric vehicles by 2025. Extrapolated across the industry this could mean a 30-40% market share for EVs.
In the US, Tesla outsold Mercedes in the luxury car market in 2016 for the first time in 40 years.
For Reid, this would mean an extra 800,000 mt of lithium demand by 2025, with a significant pickup of cobalt, nickel and graphite, and also silicon.
And it is not only electrical vehicles. With growing power generation expected from renewables, storage of the electricity generated will become more and more important.
Luke Kissam, CEO of one of the world's largest lithium producers, Albermale, forecasts an extra 8,000-10,000 mt/year of lithium demand by 2020, with wholesale electronic storage expected to play a major role.
At the same time, lithium demand already significantly outpaces supply. Spot prices in China have reached $25,000/mt this year, compared with long-term contract prices of $4,000-$7,000/mt, reflecting its scarcity.
According to Roskill analyst David Merriman, the lithium market has been in deficit since 2013, largely because of demand outpacing supply growth.
Although stockpiles of minerals and concentrates have kept most end-processors overall well-supplied this year "increased control of feedstock, and later refined product, has led to a virtual tightness in lithium supply," Merriman said.
While battery demand for lithium is currently only around 38% by end-use at 66,000/mt in 2015, it is expected to rise to 58% by 2020, he said.
At 35,000 mt, battery demand for cobalt is expected to increase from 39% by end-use to up to 50%. Graphite, up to 7% from 2% currently.
And although the lithium-battery industry is waking up to raw material issues, "based on short-term growth projections it may be too late to prevent an impact," Merriman said.
Yet some concerns remain, especially over how much new supply will affect prices in the near to medium term.
"The demand story is there and it is well recognized, but the concern is the amount of potential supply coming online," Macquarie's metals analyst Stefan Ljubisavljevic said in a panel discussion Monday.
"There's a lot of volume to come to market in the next 12-18 months and, unless there is 'hockey stick' demand from EVs, it is unlikely the market can absorb all that volume without prices softening," he said.
While much of the supply chain to 2016 came from junior mining firms, new supply is expected to be largely from the larger producers, according to Merriman, such as Chile's SQM, America's Albermale and China's Tianqi.
"Since 2016 incumbent producers have become more active in expansion, investment and increased overall exploration and production," Merriman said. "Prices have incentivized both incumbent and junior companies to expand."
