Australia’s ‘white gold’ was supposed to fuel the EV transition – then prices for battery


Minerals crucial to electric vehicle batteries have become sought after by carmakers tapping into the electrification of the automotive industry.

But recently something counterintuitive has happened – the prices of lithium, nickel and other battery minerals have collapsed.

Since late 2022, lithium prices have fallen more than 80%, while nickel is down by 40%, according to benchmark prices. Cobalt, another battery mineral, has shed 40% of its value, while copper, used in EVs and batteries, is also down, albeit by a more modest drop of about 10%.

In response, the profitability of many mines is being stretched, and some are closing, putting a cloud over Australia’s quest to fuel the transition to EVs.

The abrupt price falls have confounded analysts who had anticipated an era of high battery mineral prices would take hold.

Why have mineral prices collapsed?

While EV demand continues to grow, sales appetite has lagged projections, allowing mineral supplies to build up and create a supply and demand imbalance.

Part of the reason for the imbalance is the price discrepancy between EVs and cheaper petrol vehicles, according to Jake Whitehead, the head of policy at the Sydney-headquartered Electric Vehicle Council.

There was an expectation that price parity between mass market EVs and petrol equivalents would occur around 2025, but then Covid-related disruptions struck the automotive sector, leading to factory closures and breaks in supply chains.

This pushed back the timeline for price parity by two to three years.

The delay in price parity has coincided with an inflationary surge in living costs, prompting many price-sensitive consumers to delay EV purchases or buy a cheaper petrol vehicle.

“We can’t underestimate that for many carmakers, this is a significant transition that requires a once-in-a-generation level of investment for them to pivot to electric vehicles,” Whitehead said.

Some governments, including China and Germany, have also revised subsidies for EV purchases, leading to a dent in sales. Similarly, France limited the vehicles available for its EV grants scheme.

“While at this moment in time, there might be a bit of an oversupply of minerals, there’s going to eventually need to be much more supply,” Whitehead said.

“The story for Australia is that the opportunity still exists for us to bring more nickel, lithium and other battery mineral mining online.

“In fact, we need to be doing that not just to support our own transition, but that global transition.”

EV sales are starting to gather pace in Australia, although it is coming off a low base compared with other markets.

Part of the delay in uptake has been blamed on years of political bickering and a lack of a new vehicle efficiency standard that allows carmakers to sell less fuel-efficient cars to Australian buyers than they typically can elsewhere.

The federal government has pledged to introduce a fuel-efficiency standard for cars after receiving “overwhelming” support through a public consultation process, though it is has been criticised over delays releasing the plan.

What happens next?

Lithium is not a particularly rare mineral and until the potential of EVs started to be realised it was not considered that valuable.

But as EV demand increased, the resources sector rushed to build new projects, prompting miners to refer to lithium as “white gold”.

skip past newsletter promotion

Supply of lithium has almost doubled over the past two years with many mines starting up in new jurisdictions, according to business intelligence company CRU, leading to an oversupply.

CRU’s Martin Jackson and Sam Adham, who analyse battery material markets, say mineral prices could recover after higher cost producers are forced to cut production.

“The current supply surplus looks set to last at least for the next couple of years unless we see a dramatic change in plans from the supply side,” Jackson and Adham said in a joint statement.

“Falling lithium concentrate prices are already cutting into the margins of the least competitive of these producers, and curtailing production could yet bring the lithium market back to balance.”

Battery material price changes during 2023

The steep falls in battery mineral prices has already led to mine closures, with Core Lithium announcing at the start of January it would suspend operations at its project near Darwin.

Days later, administrators at Panoramic Resources said they could no longer keep the Savannah nickel mine going in Western Australia. Canadian miner First Quantum then announced it would cease mining at the Ravensthorpe nickel and cobalt mine, also in WA.

The upside for consumers is that falling battery mineral prices will reduce costs for carmakers, which should eventually be factored into the selling price.

More affordable EVs would aid the global push to electrify transport and reduce car emissions, seen as crucial to meeting zero-emission targets.

Lithium ore falls from a chute on to a stockpile at a facility in Australia
Experts believe the demand for white gold will remain strong despite the current market imbalance. Photograph: Bloomberg Creative Photos/Getty Images

Adham said that while it takes time for lower prices to feed through the supply chain, Tesla and BYD were already cutting prices of their vehicles.

To be sure, EV demand is still strong, with global sales up almost one-third from the prior year; they are just not as strong as the mining sector had anticipated.

Battery demand has increased 44% year-on-year, according to London-based energy transition researcher Rho Motion, with the EV market responsible for the lion’s share of that demand.

Rho Motion’s head of research, Iola Hughes, said that even though there was some excitement in the market about the use of non-lithium batteries, the demand for white gold would remain strong.

“In terms of a long-term impact, our expectation is that lithium batteries will continue to dominate the EV space, with alternative batteries such as sodium ion set to be used at a much smaller scale in smaller vehicles, with typically smaller pack sizes,” Hughes said.

“Therefore, demand for lithium is still set to increase massively over the coming years.”



This article was originally published by a www.theguardian.com . Read the Original article here. .