Electric cars drive demand for metals

Soaring prices of lithium, cobalt and graphite are not a bubble as they are underpinned by real growth in the electric vehicle market and supply trends, analysts said at the Investing in African Mining Indaba in Cape Town on Tuesday.

Lithium and cobalt prices have risen sharply in the past year and remained high, while graphite prices have softened from recent high levels. Africa has various lithium, cobalt and graphite projects.

Andrew Grant, data analyst at Bloomberg New Energy Finance, said among the electric vehicle manufacturers, Tesla favoured batteries that were nickel-cobalt-aluminium, General Motors favoured nickel-manganese-cobalt, while Chinese car makers favoured lithium-ion-phosphate but were moving to a nickel-manganese-cobalt blend to improve quality.

Grant said electric vehicles were expected to be 35% of the automotive market by 2030. The increase in self-driving cars and car sharing would increase the market for electric vehicles because their running costs were lower than conventional vehicles.

Large-scale stationary energy storage was a secondary market for lithium.

Grant said according to Bloomberg surveys, the cost of lithium in electric vehicle batteries was projected to fall to $109/kilowatt hour from an average of $240/kWh at present. Lithium only contributed about 3% of the total cost of a lithium-ion battery.

Cameron Perks, a consultant for Industrial Minerals, said there were about a dozen lithium mines in operation and 350 individual lithium projects in the pipeline of which about 20 were showing potential.

The lithium market was in balance at about 180,000 tonnes but was expected to grow to about 500,000 tonnes by 2026, when supply would have risen to meet it.

Graphite, used in battery anodes as well as the metallurgical industry, was also interesting as battery demand was expected to replace declining demand from steel makers.

Edward Lauer, head of portfolio optimisation at Eurasian Resources Group, said although changes in chemistry were reducing cobalt use in batteries, the market was anticipating tightening supply.

One of the biggest issues facing the cobalt market was the use of child labour among artisanal miners in the Democratic Republic of the Congo whose production fed into the global manufacturing chain, so a small percentage was probably found in every smartphone battery.