Energy Metals: Key Market Insights & Latest Trends

VIKASA considers the metal markets driving Lithium-Ion battery production

Metals necessary for the production and components of the lithium batteries, which power everything from smart phones to electric vehicles, continue to exponentially increase in demand as global efforts to transition to clean energy alternatives begin in earnest. This demand is reflected in the dramatic growth markets of the metals required to power our growing clean energy economy like lithium, nickel, copper and graphite.

Lithium

Global lithium market size projections anticipate growth from 3.83 billion in 2021 to 6.62 billion in 2028 at a 10.7% CAGR (Compound Annual Growth Rate). Lithium market growth reflects the global shift to clean fuel alternatives driven by both consumer demand and policy efforts to reach carbon net zero by 2050 and minimize the catastrophic effects of global warming. Lithium Carbonate, used in the production of some Electric Vehicles and in pharmaceutical industry held a dominant market share in 2020 with continued growth expected.

Another lithium-based compound, Lithium Hydroxide, is predicted to experience the highest CAGR between 2021 -2028. Lithium Hydroxide is more costly to extract but has promising potential as a more sustainable alternative to carbonate. Advances in battery technology are predicted to drive investment in lithium hydroxide as a more sustainable and long-lasting alternative to carbonate.

Nickel

Nickel, another metal used in battery cathodes recently saw an unprecedented jump in price on the London Metal Exchange. In 18 minutes during the early morning hours of March 15, nickel skyrocketed from a stable price between $10,000 and $20,000 per ton, to over $100,000 per ton, leading to the London Stock Exchange suspending all trades on nickel. Driven by a short-squeeze centered on Xiang Guangda, a Chinese tycoon who took a short position through his company Tsingshan Holding Group Co. Guangda, who is in the physical nickel business, had predicted Tsingshan would dramatically increase nickel production to 850,000 tons in 2022. Many analysts backed Xiang’s position, predicting a drop in nickel prices as production outpaced demand. However, Russia’s decision to invade Ukraine changed to trajectory of the market, as the world’s third-largest producer of nickel, and the largest exporter of refined nickel metal – the type deliverable on the LME. Although Russian nickel exports have not been sanctioned, buyers have turned to alternative sources in the wake of their invasion.

Due to nickel’s status as a physical commodity worldwide, the risk of traders being unable to make margin calls sent the LME into crisis mode. In the wake of this historic short, the LME stopped all trades, and eventually chose to cancel all trades that took place on Tuesday, essentially rewinding the market to the closing price of $48,078 on Monday, March 14. Even at that price, LME brokers failed to pay almost $500 million of margin calls related to the short, with Tsingshan representing about half that amount.

Graphite

Graphite, utilized in Electric Vehicle batteries is expected to see a surge in demand despite predictions of battery chemistry changes. Both synthetic and natural graphite are used in Lithium-ion battery anodes. In 2021 graphite saw a slight increase in price due to unexpected environmental investigations in China and shipping disruptions due to COVID-19. In 2022, market experts predict a growth in batteries, with growth opportunities for both natural and synthetic graphite. Benchmark Mineral Intelligence data indicates natural graphite for battery demand totaled about 400,000 tons in 2021, with an expected increase to 3 million tons by 2030; synthetic graphite demand is predicted to grow from $300,000 tons to 1.5 million tons by 2030. This predicted growth outpaces availability, so the onus will be on synthesizing and mining this material quickly to meet future demand.

Copper

Copper foil, another metal utilized in Lithium-ion battery production, is expect to follow the growth of other metals in the sector. The copper foil market size was 5,703 million in 2020 and is projected to grow to 10, 375.6 million by 2028 at a CAGR of 7.9%. Market growth will likely be driven by continued population growth, and the vast applications of copper foil in our commercial and consumer electronics and batteries. While circuit boards still hold a dominant market share of production, batteries are estimated to be the fastest growing segment of copper use between 2022-2028.

VIKASA Spotlight

We are currently reading Big Lithium will be built, but by who? featured in Mining Magazine and co-authored by one of our clean energy advisors, Alex Grant, Principal at Jade Cove Partners.

Here is an excerpt: “In order to make the energy transition a just transition, “Big Lithium” needs to minimize its socioenvironmental impacts. The best way to reduce these impacts is to reduce overconsumption and build lower impact mineral and metal supply chains.”

We are currently listening to The Global Race to Mine the Metal of the Future with guest Dionne Searcey on The New York Times’ “The Daily” podcast.

Here is an excerpt: “In the high-stakes competition to dominate the business of clean energy, the Democratic Republic of Congo is a major arena: The country is the source of more than two-thirds of the world’s cobalt, a key component of electric-car batteries. In recent years, China has established a strong presence in Congo, while the United States has lost ground. We went to the African country to understand how that happened.”

About VIKASA

VIKASA Capital Inc. is a global investment and capital advisory firm focused on clean energy, fintech and India. We enable growth and success for our clients and partners through deep sector expertise, independent analysis and a differentiated value-added approach.