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Addressing challenges amidst EV expansion and supply adjustments

In recent times, the stability of battery demand and raw material supply in the face of global economic fluctuations experienced a shift in 2023. Economic headwinds began affecting consumer sentiment, leading to changes in the dynamics of electric vehicle (EV) sales and subsequent impacts on battery raw material demand.

While EV sales retained strength, the extraordinary year-on-year growth rates witnessed in preceding years were not sustained in 2023. Overcapacity in EV production, an accumulation of inventory, and destocking by cathode producers contributed to weakened demand for battery materials. This, coupled with market oversupply, resulted in a significant softening of battery raw material prices during 2023. What lies ahead for 2024?

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  1. Moderated EV Growth: Despite expectations of steady growth in EV sales for 2024, the year-on-year growth rate is projected to decrease to 23%, a decline from the exceptional 36% seen in 2023. Economic uncertainties, particularly the influence of relatively high interest rates on buyer decisions, are anticipated to impact markets, especially in regions like the US where vehicle financing is integral.
  2. Lithium Supply Dynamics: Forecasts indicate a 30% increase in lithium supply for 2024, following extensive expansions in China during 2023. However, the impact of the current pricing environment on supply remains uncertain. Potential production cuts or delays in expansions might influence a tentatively balanced lithium market in 2024, with stabilization expected after a potential second-quarter restocking period.
  3. Challenges in the Cobalt Market: The pace of cobalt demand growth slowed in 2023 due to macroeconomic uncertainties. Continuing uncertainties in 2024, alongside the growth of cobalt-free technologies, present potential threats to demand. With substantial capacity additions in the Democratic Republic of the Congo (DRC) and Indonesia in 2023, a surplus in the global cobalt market is predicted for 2024, resulting in bearish price trends.
  4. Manganese Market Dynamics: The high-purity manganese sulfate (HPMSM) sector anticipates restrained growth in 2024 due to sluggish performance in the NCM cathode material sector and prevailing bearish market sentiment. Oversupply challenges since 2021 are expected to persist, influencing downward pressure on prices. A recovery in HPMSM prices is contingent on indications from key battery material sectors and downstream consumers.
  5. Nickel Market Trends: The nickel market has been in surplus since 2022, primarily driven by a surge in Indonesian mine supply. A continued oversupply is projected for 2024, contributing to a decline in average nickel prices. Despite an expected technical price rebound in the first quarter, structural oversupply and macroeconomic factors are likely to shape the nickel market trajectory in 2024.

In essence, the outlook for 2024 signals challenges in the battery materials market, marked by decelerated EV growth, concerns of oversupply, and potential downward pressure on lithium, cobalt, manganese, and nickel prices.

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