Metal Movers: Battery Materials Outlook

Tom: Hello and welcome to the Argus "Metal Movers" podcast. My name is Tom Kavanagh. And I'm here with Dylan Khoo from Argus Battery Materials. And we're going to be going over some of the most recent trends in battery materials in light of our Battery Materials Analytics product that came out just recently. Hi, Dylan.

Dylan: Thanks for having me on. Looking forward to talking about it.

Tom: So, I think the last year in battery materials has been a bit of sort of pivotal year. We've come to the bottom in quite a few different materials, and the cycle seems to want to either change, or maybe politically there's going to be some changes forced. Obviously, the flagship material in batteries is lithium. So, how do you see the lithium market developing over the next year or so, and then going out forward?

Dylan: Yeah. So, lithium is here, what seems to be rock bottom recently. And then continue to fall a little bit further than that. I don't see any real change for that coming over the next year or two. For the rest of 2025, into 2026, probably going to be continuing around to cover low level before we start to see some kind of rebound up as demand continues to grow and outpace the new supply that is coming online. Beyond that, we expect to see some continued growth into 2030, particularly picking off kind of as the European EV market is expected to continue growing and growing. Technically, it was in China and the rest of Asia-Pacific. That's going to drive a lot of demand increase, and supply will not continue to able to meet that. Prices probably aren't going to continue to rise anywhere near to the level you did see in the more recent spikes. That is not going to hit 2022 levels, 2023 levels, but it will remain below that.

Tom: What's been keeping it low over the past year or so?

Dylan: There's just a lot of supply on the market. Lots of providers kept coming online. Recently, we've seen a lot of new hard rock in Zimbabwe, continued expansion in China as well, Australia growth everywhere, lots of supply coming online. And entering the story a little bit more now, actually start to suppress those prices. Recycling becoming more of a factor, particularly in that more developed Chinese market, lots of end-of-life batteries there are getting fed back into the system, keeping more lithium supply high.

Tom: And we see battery chemistries developing around the world, sort of new chemistries coming forward. Even sort of hinting at the different types of chemistries. Do you think that the battery chemistry mix going forward is supportive of lithium?

Dylan: Yes, essentially. The only option that doesn't use lithium is sodium ion. There's a lot of threshold with sodium ion, a lot of noise around it, particularly from BYD and CATL, who are obviously the biggest players in the battery market. I think a lot of that's going to be in the smaller sectors where it's not going to have as much of an impact on overall lithium demand. So, if you look at the most recent CSL product launch in that...an extra range, they're having these 24 volts starter batteries for trucks, which is not an insignificant market, but we're not talking about hundreds of gigawatt hours scale. And the other one is a battery for electric vehicles. But actual adoption of that, unclear in the near term. And the actual level to which that will impact overall lithium ion demand, probably fairly minimal. And then we're seeing the other more emerging chemistries which are going to use more lithium for [inaudible 00:03:32] today. Things like, much further down the line in that, all solid state batteries would be as all lithium anodes boosting lithium demand.

Tom: So they use more lithium per kilowatt hour than the current range of batteries?

Dylan: Yeah. Generally, yes. You're going to solid state because you won't be using lithium solid metal anodes, which you're going to add more lithium demand in there.

Tom: Interesting. I think, this year, we've also seen not only sort of the bottom of the cycle in lithium, but also some other metals in batteries. But now that seems to have shifted with increased defensive trade policies in certain areas of the world. How do you sum up the impact of global trade measures on battery metals over the last year?

Dylan: Yeah. Well, it's been volatile in some areas. Whenever we're talking about, there's lots of bottlenecks along that supply chain. Whether you go from the first stage from supply, we have things like DRC Congo shifting the exports of mine and cobalt. And then further down you get to more refined products, even all the way down to the batteries at the end from the electric vehicles. We have the tariffs on EVs, and most recently these Chinese export controls on lithium ion batteries and other technologies to make them. Lots of disruption there and potential for more in the coming years. It's unclear where this could all end up and where could it all go.

Tom: What's our view on the cobalt market now that we've seen these quotas come into force?

Dylan: Yes. The DRC is the dominant player in the cobalt space. And this is really as much influence as they'll ever have on the cobalt market. From here on out, it's only going to decrease as the cobalt shift in battery decreases. And we see more cobalt supply globally from Indonesia, places like this, and more increased cobalt recycling. So, we can see there's an attempt from the DRC to regain control over prices, and kind of steady it while they still can influence it in the way they can now as a sort of one-nation OPEC. And they're unable to influence prices to this extent. There is potential, depending on how much disruption this causes for demand destruction, where people will move away from cobalt chemistries more quickly. We're already seeing this as a trend though. There's a limit to how much can be accelerated beyond what is already happening, and the attempts from all automakers really to minimize the use of cobalt, if not eliminate entirely. There's a limit to how much more can be done.

Tom: With that battery chemistry mix, which regions are more likely to be reliant on cobalt for longer?

Dylan: Yes. We look at cobalt as one of the parts of the mix for the more long range vehicles, high range of entities. So, really anywhere outside of China and the Chinese products are going to continue to use cobalt to a higher extent. So, you see this with NMC still being completely dominant in Europe and North America. And that situation is likely to continue for a lot longer. But all of these new chemistries that are coming on the market as well. So GM, Ford researching these lithium-manganese-rich NMCs, less cobalt than current chemistries, a lot of them, but still using cobalt. They're still relying on that cobalt supply chain.

Tom: Yeah. But then, those chemistries are sort of high in manganese, high in lithium. And they reduce the cobalt, but it's not all the way gone.

Dylan: No, it's still containing cobalt. Yes. Take advantage of the lower costs of manganese, and boost that manganese content to reduce nickel and cobalt.

Tom: Do we forecast manganese as well? Are we seeing a significant uptick in demand there?

Dylan: Yes, we are seeing increase of manganese demand in our forecasts, particularly due to these manganese-rich chemistries. We also include various other variations in these chemistry mixes. LMFP as well, this manganese doping into the battery, we're seeing a lot as well to increase that energy density of LFP and bridge the gap sort of between LFP and NMC. We expect a lot of uptake for manganese. The real bottleneck for that being the high-purity manganese sulphate production. Still very concentrated in a few dozen facilities in China really. Fairly little outside of that. It's a very small market, however, compared to total manganese supply. So it's the kind of thing that a few plants being spun up can accommodate for quite a lot of actual demand growth [inaudible 00:07:51] markets. And so, a few projects globally, which are in the works, can go towards closing that gap.

Tom: Okay. So it's not something, say, in five years that we could see China pull the strings on, let's say, in the way that they've done with graphite and raw earth.

Dylan: Definitely, as it stands now, China is the dominant player in that supply chain without a doubt, and has similar control over the graphite supply chain. I would say that in the future there is probably more confidence perhaps in manganese being set up elsewhere than graphite due to some of the more inherent difficulties of setting up things like natural graphite supply chains and synthetic graphite supply chains. It's a little bit harder than manganese, in my opinion anyway.

Tom: We have quite a few project trackers across various different markets. And I think the talk over the past few weeks is where China has control, it looks like it's going to exercise control. Do you see any particular pain points in the battery materials, a particular sort of geopolitical risk?

Dylan: Yeah, definitely. So, obviously, graphite is huge. You can't move away from graphite right now. The only technology as an alternative, anywhere near commercialization, we're talking about sodium ion maybe, which comes with huge other supply chain issues and performance impact. Or you go to silicon, which is technologically still not quite there. I think silicon additions to graphite is very much present. Lots of people are doing that. You put more silicon in the battery to reduce the graphite. You're still using a big graphite anode. And you have to use that if you want to sell any batteries, any EVs really. So, that's a huge risk factor.

And then as everywhere else, China is pretty much the dominant player in refining and processing. If you talk about active materials, talking about precursors, anything like this. But also the equipment being used to make batteries. The very big player in that most of the batch manufacturers which are being set up now in Europe are using some kind of Chinese equipment somewhere in that. But not sure exactly how much different ones, but somewhere there'd be Chinese machinery being used and equipment. Even things like separators, always got components that don't really fall into the materials discussion necessarily, but very important.

Tom: So, that's going to add to the volatility of these materials going forward, maybe in the international markets, maybe not necessarily Chinese domestic market.

Dylan: Yeah. Lot more [inaudible 00:10:11] potential for that definitely.

Tom: I want to move on now to maybe...let's not say good news. I know that we've been talking about low prices and geopolitical risks, trade measures and such. But looking forward, have we seen any bright spots in the battery market?

Dylan: Yeah. Yeah. So, recently, Europe's EV share performance has been really strong coming off of the kind of doldrums of the recent years. The 2025 EU emissions targets have kicked in and forced automakers to shift more EVs. Particularly Volkswagen has been quite heavily impacted by that compared to some other ones of average emissions mix being quite high. So, they've got some strong offers, particularly in their home market in Germany, driving a lot of increased growth there. We're also seeing outside of the more traditional EV markets, you often think of in Europe, so Western Europe and Northern Europe, Spain and Poland, places like this in Southern and Eastern Europe. We're seeing a lot more growth now. A lot of it being driven by the influx of new manufacturers, so BYD particularly. These more cheap models driving a lot of growth in these markets for both battery electric and plug-in hybrids.

Tom: And China continues to kick on, I assume.

Dylan: Yeah, yeah. China's continuing to kick on. We're very bullish still on China driving probably about a third of all lithium and battery growth out to 2030, just Chinese battery electric vehicles. We're now at a stage where it's in its own momentum now. We're at price parity for most segments, even getting towards the larger, more high-end SUVs with much bigger batteries. It's getting towards the price of normal IC vehicles. And at that point, it really does take off after itself. And we expect it to be dominant in early 2030s, definitely with very few niches left for IC vehicles.

Tom: So, when these markets reach a certain level of EV adoption, we're not assuming that there would be any saturation, and that you would reach sort of a half and half ICE market. We assume that EVs just continue to take market share until ICE is nearly wiped out, apart from maybe some special niches.

Dylan: Yeah. So we expect it to slow down more as the kind of price increases. You always have people who are, weather for personal reason, their use case, or their brand loyalty, all these kinds of things, they are very attached to ICE.

Tom: So, the Jeremy Clarksons of world.

Dylan: Yeah. We'll start seeing the change a little bit later, perhaps. But as we expect the critical mass sort of to form, so things like infrastructure, once you go from having 5% of vehicles on the road being your plug type to having 20% of vehicles on the road being your plug type, there's infrastructure everywhere in comparison to charges we're seeing now. And there's all this kind of aspect of...it's a very different technology. And the way you live with it is very different. But if all of your neighbors are doing it, you know, once you know someone personally who's doing it, as that kind of picks up and it starts being less of an early adopter, early enjoyer situation, kind of to keep growing through that stage.

Tom: And then it makes it easier, like you said, to access the charges too. I suppose different pieces of infrastructure will build up around the vehicles. There's charge points that have either a restaurant or a cafe or something like that.

Dylan: You have the infrastructure everywhere. And also just, as you get more sales, the model availability growing. So, you go from situations where the only viable ones a few years ago, you might've said things like a LEAF, and a Model 3 and Model Y would be your options. And then you have all sorts of things in different segments. So, if you want a three-row SUV, you can get that. If you a station wagon, you can get that. If you want a small city car. There's always different options now that really open it up.

Tom: And is that what we're seeing in Europe now? We've got these manufacturers making various different models. It's more choice for the consumer.

Dylan: Yeah, definitely. And there were some really interesting announcements at IAA in Munich recently as well. The Volkswagen launching that new family of small vehicles when it was called formally called the ID.2. This is where it's going to get a lot of new people shifting over, especially Volkswagen giving that show of confidence to their EV range. They're switching from this nomenclature of ID.3, ID.4, and calling it the ID Golf, and really merging out their existing lineup, and building that kind of mass market level of visibility for it. They're saying this is ready for the mainstream, for people who have bought the same vehicle every year for the last decade, perhaps, whatever. They're now going to have to that in electric and ready to switch quite easily.

Tom: Okay. And moving away from vehicles, you know, there's various use cases for lithium ion batteries. Obviously, the second largest would be energy storage. And we're seeing a shift in grids across the world towards renewables. And that obviously needs to be facilitated by energy storage batteries. Where do we see that market developing over the next decade?

Dylan: There's huge growth potential for the ESS. So, we expect there to be very large growth, and to be a very quick growing area for it from what was essentially nothing in the global scale of lithium ion batteries and the materials demand before 2020 to being a huge, really important part of it that can sustain a lot of growth for companies and for material suppliers just off the ESS market. And the potential upside for that is even larger. If you think about things like data centers, that kind of growth could be huge, more electricity demand. And many markets now which have very low ESS penetration, very low [inaudible 00:15:34] additions. So, if you go to pretty much anywhere, honestly, outside of Europe, China, and USA, right now, there's very few batteries on the grid. Then we're seeing lots of pipeline in the Middle East, in Saudi Arabia, UAE. And potential for places like India, which has a lot of solar capacity, and a potential to have a lot more...to have loads of batteries [inaudible 00:15:54] very high.

Tom: What are these typically matched with? Is it solar installations, or is it kind of nuclear? Where do they tend to pop up?

Dylan: Yeah, pairs very well with solar. Very well with solar. With solar in particular, because you generally have quite well predictable generation patterns, so you know at what hours of which day throughout the year you're generating solar. [inaudible 00:16:16] that really well where you can smooth out that curve. California in particular is a market which sees a lot of that because they have a lot of solar generation, and they lean heavily on batteries to adjust for that and shift that from the peak in the middle of the day to later in the evening when people are consuming that electricity.

Tom: That's interesting. Are there any other use cases for these types of batteries other than sort of grid-level storage?

Dylan: Yeah. So, we have more behind-the-meter batteries at the household level. You'd have it as well. Different markets have different incentive systems, which indicates which ones will go more towards grid scale versus individual residential ones. And also for businesses. And you can use it at some of the data centers for smoothing and ensuring consistent demand. There's lots of use cases for it.

Tom: So, I think, finally, if you could sort of sum up where we are in the life cycle of the battery market right now? Let's say the 2010s, we were developing batteries, and now going forward. Where do you think we are right now?

Dylan: Right now is the era of electrification really throughout the economy. I think that batteries just play a key role in that. That is the way that you store electricity, as more and more things switch to electricity. So, transport being a big one for passenger vehicles. But everything else that's going to start coming along in next few years, batteries are going be an option for all of it. So, marine applications, heavy duty vehicles, light passenger vehicles, micro mobility, two wheelers and three wheelers, all of this switching towards batteries. And then as the grid electrifies, adding all of this variable new electricity to it, batteries play an absolutely essential role in that.

Tom: Okay. I think that's all we've got time for today. Thanks for coming on, Dylan. If you would like to see any more of Dylan's analysis, as I said, the Battery Materials Analytics has just come out. So, if you visit www.argusmedia.com, you can check that out along with all of our other battery materials coverage. As I said, my name is Tom Kavanagh. This is Dylan Khoo. It's been a pleasure to be with you today. And thanks for watching.