Battery boost drives commodity demand
As demand for batteries for electric cars takes off, driven by climate change pressures and oil market disruptions, there will be a pressing need for the materials to manufacture them.
“Alternative sources of energy such as electric batteries will become even more important as investors grow more wary of the future of the oil industry,” said UNCTAD’s director of international trade, Pamela Coke-Hamilton. “The rise in demand for the strategic raw materials used to manufacture electric car batteries will open more trade opportunities for the countries that supply these materials.”
In its Global EV Outlook 2020, released in June 2020, the IEA said it expects global electric vehicle stock (excluding two/three-wheelers) to grow by 36% annually in its Sustainable Development Scenario, reaching 245 million vehicles in 2030 – more than 30 times today’s level. Its more conservative Stated Policies Scenario sees stock rise to nearly 140m vehicles, accounting for 7% of the global vehicle fleet.
The IEA estimates that material demand for the batteries of the electric vehicles sold in 2019 was about 19 kilotons (kt) for cobalt, 17 kt for lithium, 22 kt for manganese and 65 kt for nickel. Under its conservative Stated Policies Scenario, it forecasts demand of 180 kt/year for cobalt, around 185 kt/year for lithium, 177 kt/year for manganese and 925 kt/year for class I nickel by 2030. These values more than double under its Sustainable Development Scenario.
Reserves of the raw materials needed for car batteries are highly concentrated in a few countries, making them rich pickings for dry bulk movers. According to UNCTAD, nearly 50% of world cobalt reserves are in the Democratic Republic of the Congo (DRC), 58% of lithium reserves are in Chile, 80% of natural graphite reserves are in China, Brazil and Turkey, while 75% of manganese reserves are in Australia, Brazil, South Africa and Ukraine.
In an added boost for trade, UNCTAD’s report – Commodities at a glance: Special issue on strategic battery raw material – indicates that the bulk of value added to raw materials used in making rechargeable batteries is generated outside the countries that produce the materials.
“For instance, value added to cobalt ores by the DRC is limited to intermediate products or concentrates. Further processing and refining are mostly done in refineries in Belgium, China, Finland, Norway and Zambia to obtain the end products used in rechargeable batteries as well as for other applications,” notes UNCTAD.
Looking at each commodity in detail, the world’s terrestrial cobalt resources are estimated to be about 25 million tons. Reserves were estimated at 6.9m tons in 2018 by the United States Geological Survey. DRC holds the largest reserves at 3.4m tons, followed by Australia and Cuba at second and third respectively (1.2m and 0.5m tons).
Lithium resources are mainly concentrated in Chile, Bolivia and Argentina – known as the lithium
triangle. Total world resources are estimated to be about 62m tons and reserves are estimated at 14m tons. After Chile with 58% of the world’s total lithium reserves comes Australia and Argentina with approximately 19% and 14% respectively.
For graphite, Turkey, China and Brazil account for about 31%, 25% and 24% respectively of the world total reserves, estimated at 300m tons.
Total identified world land-based manganese resources are estimated to be approximately 17 billion tons; reserves are estimated at 760 million tons, with South Africa, Ukraine and Brazil accounting for almost 63% of the total.
“As more automotive manufacturers are rolling out electric vehicles, the demand for raw materials used in rechargeable batteries is also rising,” notes UNCTAD. “In recent years, the cobalt market expanded rapidly, with demand rising above 100,000 tonnes for the first time in 2017. In 2018, demand surged by 25% from the previous year to 125,000 tonnes with about 9% accounted for by the EV battery sector.”
Commodity traders and movers should closely watch these four key commodities, not only for the potential growth in the primary trade of the materials themselves, but also for the secondary trade of processed and refined products.
Source: Baltic Exchange