Australia Battery Metals Market Forecast: Top Trends for 2023

Australian EV sales strong, but have room to grow

The main demand driver for lithium and cobalt is the EV industry, which saw sales reach new all-time highs in 2022.

“The global market share for passenger EVs has quadrupled since 2019, with EV sales representing about 9 percent of the car market in 2021,” Australia's Office of the Chief Economist (OCE) states in its latest report.

“Strong underlying demand and EV manufacturers’ declarations of further increases in production, imply that EV sales could reach almost 40 percent of annual vehicle sales by 2030.”

In 2021, Australian EV sales tripled from the previous year to 20,665 units, much higher than 2020's 6,900. This increase represented a 2 percent market share of all sales compared to 0.78 percent in 2020, according to the EV Council of Australia. As of October 2022, EVs represented 3.4 percent of all Australian car sales.

“It’s great to see so much momentum behind EV sales in Australia, but to put our 3.4 percent in context — Germany sits at 26 percent, the UK at 19 percent and California at 13 percent. The global average is 8.6 percent so Australia has a long, long way to come,” said Jake Whitehead, the EV Council of Australia's head of policy.

Even though the Australian EV market might seem small, global passenger EV sales are expected to reach over 14 million units in 2023, which in turn means that demand for battery metals is expected to keep increasing.

Lithium market still tight heading into 2023

With demand for battery metals expected to remain strong throughout the coming decades, all eyes are on where supply to meet the needs of the growing EV industry will come from.

Speaking with INN about the lithium market in 2022, Daisy Jennings-Gray, senior analyst at Benchmark Mineral Intelligence, said she anticipated a huge hike in lithium pricing in 2022, but the scale at which this happened was unprecedented.

“What was particularly surprising compared to 2021 was the steep climb in feedstock prices, which really indicated the extent of supply tightness in the market,” she explained. “(It also) highlighted that high lithium prices aren't just reactionary to sentiment, but a reflection of the raw material disconnect.”

Australia hosts the world’s largest lithium mine, Greenbushes, and is also home to key producers, including Pilbara Minerals (ASX:PLS,OTC Pink:PILBF) and Mineral Resources (ASX:MRL,OTC Pink:MALRF). The country’s lithium production is expected to increase in coming years as further capacity comes online.

“Lithium had a stellar year in terms of lithium carbonate equivalent (LCE) prices globally. In that environment, Australia's lithium exports are growing at an unprecedented rate,” Paola Rojas of Synergy Resource Capital told INN.

Lithium companies had an interesting year, as in mid-2022 investment bank Goldman Sachs (NYSE:GS) released a bearish report on prices that caused major volatility in lithium stocks everywhere.

“On the flip side, Goldman Sachs' allocation to lithium miners has never been larger (as of September 2022, from the Australian players they hold Piedmont Lithium (ASX:PLL,NASDAQ:PLL)), while their head of commodities research regularly stresses the gap in supply ahead,” Rojas said. “I caution investors to take any extreme views with a grain of salt and use more than one source to form their own opinion as to where the market is going.”

Interest in Australian lithium miners was also on the rise in 2022, with major EV makers such as Tesla (NASDAQ:TSLA) betting on supply from the country. In 2023, deals between OEMs and battery metals miners will only continue to gain momentum.

“These types of deals are a must for battery manufacturers and OEMs given the market dynamics (majority of the market operating within the constraints of private contracts),” Rojas said. “I expect these deals to become more aggressive (i.e. either better prices, longer commitments or other covenants) as competition for near-term production/production becomes fierce.”

Cobalt well supplied, prices lower in 2022

Cobalt, another key battery metal, also experienced a spike in prices in 2021, doubling in value on the back of surging demand for EVs. But its 2022 story was different from lithium, with prices pulling back in the second half on strong supply.

Cameron Hughes of Benchmark Mineral Intelligence told INN the cobalt market performed in line with expectations in 2022.

“The market was forecast to enter a small surplus in 2022, so it is not too surprising prices are ending the year lower than where they were at the end of 2021,” he said. “Of course, some things which impacted the cobalt market in 2022 were unpredictable, such as the COVID-19 lockdowns in China.”

Another trend that continues to be at the forefront of cobalt sector discussions is the increasing market share for cobalt-free cathode technologies. But Jack Bedder of Project Blue believes investors shouldn't be concerned.

“As has been the case for the past decade, batteries will continue to drive demand dynamics,” he commented to INN. “Cobalt demand in lithium-ion batteries is set to increase at 11.3 percent per year. In the near term, the threat of cobalt substitution is low as this represents a longer-term trend.”

Australia is the third largest cobalt-producing country, after Russia and far behind the Democratic Republic of Congo.

The country is currently home to four cobalt-producing companies: Glencore (LSE:GLEN,OTC Pink:GLCNF), BHP (ASX:BHP,NYSE:BHP,LSE:BHP), First Quantum Minerals (TSX:FM,OTC Pink:FQVLF) and IGO (ASX:IGO,OTC Pink:IPDGF), with Glencore being the dominant producer in the Australian market and the only company producing refined material. There are also a few cobalt companies developing projects that could help supply the battery market.

“There is expected to be significant growth in consumption, especially for cobalt chemicals, driven by growth in the battery sector and increased EV manufacturing,” as per the OCE. “Mined cobalt production is expected to more than double by 2030 to meet the increase in demand, however this will require significant additional mine capacity to come online over that period.”