Asia Pacific Has Strategic Opportunity to Scale Up EV Battery Raw Materials Output

Adding value to lithium products

Lithium prices have been on the rise since last year, as strong demand from the electric vehicle sector paired with tight supply has sent prices for the commodity through the roof.

“We don't see much of a possibility of a balanced market out until at least the mid 2020s, so up until 2026. And even still in that scenario, it's going to be fairly tight,” Cameron Perks of Benchmark Mineral Intelligence told audience members at the Battery Gigafactories Asia Pacific conference in Perth last week.

When looking at how the electric vehicle sector developed historically, China and its subsidy policy played a key role.

But other parts of the world have their own factors working in their favour. “What we're seeing this time around with the Europeans entering, the North Americans entering this market, is something in my personal view the Chinese never had, and that's this concept of brand allegiance with their consumers,” Ron Mitchell of Global Lithium (ASX:GL1) said.

Asia remains the major source of demand for lithium, despite the spread of new battery manufacturing capacity in Europe and the US. World demand for lithium is estimated to increase from 583,000 tonnes of lithium carbonate equivalent in 2021 to 724,000 tonnes in 2022, according to the Office of the Chief Economist. Over the following two years, demand is forecast to rise by over 40 percent, reaching 1,058,000 tonnes by 2024.

In order to bring new supply into the market, one of the main challenges that the sector is facing is expertise. “We are seeing it everywhere — people are the biggest challenge for our business, securing the right people,” Jerko Zuvela of Argosy Minerals (ASX:AGY) said. “You need collaboration, you need partnerships, you need strategic enhancements to work together.”

Another big factor is finding the right resource.

“The main thing today you can identify is people, and followed by that is trying to find the next available economic deposit to be developed, and it is becoming tricky,” JP Vargas de la Vega of Galan Lithium (ASX:GLN,OTC Pink:GLNLF) said. “Even if you use direct lithium extraction or other technologies, there are things that need to be taken into account. Is there power? Is there water?”

Original equipment manufacturers are searching for consistency and product quality, and many are looking to lithium supply chains outside China, Mitchell pointed out. Australia could grab 20 percent of the world’s lithium refining in the next five years.

“This industry is still very much in its infancy. So it's not easy doing what these downstream plants are doing here in Western Australia,” Mitchell said. "They're the first movers."

Scaling up cobalt, nickel and manganese production

For nickel and cobalt, the Asia Pacific region as a whole is going to be a driving force in the coming years.

“You can see the vast potential just from Indonesia, for nickel and cobalt supply,” Harry Fisher of Benchmark Mineral Intelligence said. “There are, of course, other parts of the (Asia Pacific) region that are important to a lesser extent, but it's definitely worth noting projects in Papua New Guinea, in the Philippines and Japan.”

The story for manganese is a bit different. Even though it is a very large existing market, batteries remain a very small proportion of that space. But about 90 percent of the current manganese supply comes from China alone.

“It is still fairly early days, but you can see in our demand forecast how higher-manganese-intensity chemistries could infiltrate pharma,” Fisher said. “And I think if there's further technology development, then there's definitely more upside for manganese.”

Building resilient graphite production outside of China

No lithium-ion battery discussion would be complete without looking at the anode space, whose key raw material input is graphite.

According to data from Benchmark Mineral Intelligence, the average 30 gigawatt hour gigafactory will require around 80,000 tonnes of flake graphite, or 45,000 tonnes of synthetic graphite.

About 70 percent of flake graphite mining is happening in China, and practically 100 percent of all of the processing as well. The country accounts for around 80 percent of the anode production.

As of 2022, Benchmark Mineral Intelligence expects that demand from the lithium-ion battery sector alone will overtake all of the other demand sectors for flake graphite. By the end of the decade, it sees demand from the battery side of things matching, if not out-competing, demand from all of the other sectors for synthetic graphite.

“Regardless of the split that we're expected to see between natural and synthetic supply, the market is entering a period of unprecedented demand growth,” Daisy Jennings-Gray, senior analyst at the firm, said.

Supply expansions will be critical to meet increasing demand growth, and investment is going to be massively needed in the sector.

“We're looking at another 97 graphite mines being built out to 2035 to meet the current demand pipeline. So really, really big moves need to be taken on the anode side of the industry to contribute to the growth story,” Jennings-Gray added.