It’s a tough time for the global resources industry, and a tougher time still for those in the battery metals game. Prices for many commodities, such as lithium and nickel, have fluctuated hugely since the height of the COVID pandemic, leading many producers and explorers to change tack, some even shuttering their operations until the market picks up.
But there is, of course, that well-worn maxim which suggests that in every crisis there is, somewhere, an opportunity. As it always does, the market will pick up again. The key question is: When? And what possible arrangement of factors could compel it to do so?
Lithium
A couple of years ago, lithium had rightly earned its nickname ‘white gold’. At the end of 2020, a tonne of lithium carbonate was fetching roughly US$6,124 ($8,847). By January 2023, that figure had hit US$70,957 — a 1,058% increase in just over two years.
But the party didn’t last long. As of the end of September 2024, that same tonne of lithium had sunk to just US$10,762.
Broadly speaking, the sad state of affairs is due largely to the confluence of falling electric vehicle sales and lithium over-production from China. Australia — which last year accounted for 52% of the world’s raw lithium supply — has been particularly hard-hit. Behind Chile, the country has the second-largest supply of lithium. But for many miners, that hasn’t helped them evade the market jolts.
In January this year, Adelaide-based Core Lithium (ASX:CXO) suspended operations at its open-pit Finniss mine near Darwin until “market conditions improve”.
Arcadium Lithium (ASX:LTM) followed suit last month, saying it would place its Mt Cattlin mine in Western Australia on care and maintenance “given the continued decline in spodumene prices”, while US lithium giant Albemarle (NYSE:ALB) also announced in August that it would scale back production at its Kemerton processing plant south of Perth.
“The long-term growth potential for our end markets remains strong, and we plan to leverage our core capabilities while ensuring we remain competitive,” Albemarle CEO Kent Masters said at the time.
“Given the dynamics of the global markets we serve, we must be able to pivot and pace as necessary to maintain our leading position.”
Notably, other companies, such as Pilbara Minerals (ASX:PLS), have taken a different strategy.
“What we’ve learned historically from lithium pricing is that it can change, and it can change rapidly,” Pilbara Minerals boss Dale Henderson told ABC News at the start of September.
“It doesn’t faze us that much because we know the long-term outlook is fantastic.”
Indeed, the Perth-based miner is moving ahead with an expansion strategy to boost production at its Pilgangoora operation near Port Hedland to 1 million tonnes a year in 2025, which the company says will also deliver efficiencies that should pay off when prices eventually appreciate.
“While the long-term outlook appears strong, it is expected that there will be price and demand variability from time to time,” Pilbara Minerals Chair Kathleen Conlon said in the company’s annual report at the end of August.
“As an established producer with a strong balance sheet and sound long-term customer relationships, we will continue to navigate these cycles and stage our expansion projects to capitalise on long-term demand.”
Black mass
An oft-overlooked aspect of the lithium industry, at least when it comes to lithium-ion batteries, is that of black mass.
Not the 2015 crime drama starring Johnny Depp, and certainly not the occasion celebrated by various Satanic groups, ‘black mass’ in fact refers to a mix of crushed metals produced by recycling batteries.
At the end of its life, a lithium-ion battery is typically sent to a pre-treatment facility where it is shredded, giving way to the black mass material that contains lithium, cobalt, nickel, and manganese.
“Once you’ve shredded these batteries, you can use magnetic separation and sieving in order to separate out the casing, the electrode foils and the active material mixture that’s known as black mass,” Beatrice Browning, an analyst at Benchmark Mineral Intelligence, says.
Consider black mass roughly equivalent to a very high-grade ore containing all the minerals for a lithium ion battery.
When it comes to pricing, black mass typically mirrors that of battery-grade mineral prices. Once the end-of-life batteries have been crushed and shredded, a payable for each mineral will be determined in order to derive a final price.
Of course, the balance between the payable figure and the ‘virgin’ market needs to account for both processing costs and recyclers’ margins. Black mass prices are also impacted by the need for a discount to these virgin minerals due to the added impurities. However, some players in the sector are confident that the right level of support can turn that discount into a premium.
Last month, the US Department of Energy unveiled US$3 billion in funding for 25 selected projects to boost America’s battery sector.
“The selected projects span strategic segments across the supply chain, building and expanding commercial-scale facilities to extract and recycle critical minerals including lithium, graphite, and manganese, as well as manufacture components,” the department said in a statement on 20 September.
“These components represent the most essential building blocks of the battery supply chain, like electrolyte salts, solid state electrolytes, polymers for separators, cathode and anode materials, that are critical to onshore a robust and reliable energy supply chain.”
According to Fastmarkets, the US accounted for 6% of the world’s lithium-ion battery scrap material, but that figure could hit 11% by 2034.
Vanadium
One of the more versatile battery metals, vanadium is predominantly used to make metal alloys for high-strength steel production, and has other applications in ceramics, electronics, fertilisers, textile dyes, and synthetic rubber.
What vanadium-focused explorers and producers are particularly excited about, however, is the prospect of vanadium redox flow batteries (VRFBs). Although VRFBs have been around since the 1980s, their size and scale has proven a barrier to commercial popularity, even though they tend to be safer, cheaper, and — with the proper maintenance — capable of lasting far longer than their lithium-ion counterparts.
Partly for the failure of VRFBs to take off just yet, partly for a measure of over-supply, the price of vanadium has remained relatively steady. It currently sits at roughly US$4.60 a pound, down from about US$6.60 a year ago. But that could change.
Last month, Australian Vanadium (ASX:AVL) unveiled the deployment of its vanadium electrolyte in a VRFB for Horizon Power’s site in Kununurra, Western Australia — a first for the Perth-based company.
“What we’re seeing now is scaling, because (VRFBs are) now highly economic in a new category, which is long duration,” Australian Vanadium CEO Graham Arvidson told Mining.com.au on the sidelines of the Diggers and Dealers conference in August.
“What we’re doing as we continue this renewables path, we’re putting in lithium-ion batteries that are doing a really good job at two or maybe three hours. They just become less economical past the four-hour point, and that’s where vanadium comes into its own.
“That’s why you’re seeing in China many, many, many gigawatt hours of batteries going in, vanadium flow batteries. That’s what’s changing the market. That’s not yet reflected in the vanadium price because of the demand side, given the traditional steel sector has dominated.”
Asked what it would take for vanadium to properly challenge lithium as an input for batteries, QEM (ASX:QEM) Managing Director Gavin Loyden says that challenge is already being met, particularly when it comes to grid-scale applications.
“(VRFBs are) safer, more scalable, and we have 31% of the world’s vanadium here in Australia,” Loyden tells Mining.com.au.
“They are much better suited to our climatic conditions, and the (levelised cost of storage) over the life cycle of the battery is much better for (VRFBs) due to its longer life and longer duration compared to lithium-ion.”
According to an analysis of data from the US Department of Energy by consulting firm PwC, the average cost of VRFBs has fallen from US$480 per kilowatt hour in 2019 to US$280 in 2024, and is forecast to drop even further to US$220 by 2030.
Nickel
If any of the various battery metals had found themself in the doghouse in 2024, it was nickel. And rightly so. The metal is currently sitting at US$17,531 a tonne — a substantial drop from its recent peak of more than US$48,000 in March 2022.
The price collapse, brought on by weakness in stainless steel production (which accounts for roughly 70% of global nickel production) and electric vehicle sales, has sent jolts around the world.
In February, Swiss mining giant Glencore (LSE:GLEN) announced that it would put its Koniambo (KNS) nickel operation in New Caledonia — a joint venture between Glencore and Société Minière du Sud Pacifique SA — on care and maintenance.
“Glencore is appreciative of the French government’s efforts to revitalise and rescue the nickel industry in New Caledonia,” the company said at the time.
“However, even with the proposed assistance, KNS remains an unsustainable operation and Glencore cannot justify continuing to fund losses to the detriment of its shareholders.”
Then, in July, BHP (ASX:BHP) said it would temporarily suspend its Nickel West operations and its West Musgrave Project in Western Australia, adding it would conduct a review of the decision by February 2027.
“Since BHP announced a review of Western Australia Nickel in February, we have explored options to stem losses in the short-term and identify a viable path forward for the business,” BHP’s Australia President said.
“Like others in the Australian nickel sector, we have not been able to overcome the substantial economic challenges driven by a global oversupply of nickel.”
According to a report by the Australian Government’s Department of Industry, Science and Resources, and despite production curtailments by Western producers, emerging miners in Indonesia — the world’s largest nickel producer — are likely to contain any significant price increases.
Forecasts of pricing by the London Metal Exchange suggest the price of nickel will average US$17,400 a tonne in 2025, before rising slightly to US$17,800 in 2026. However, prices are expected to remain volatile due to short-term mismatches in supply and demand.
Down under, the closure of BHP’s nickel operations in particular is expected to help drive a drop in nickel production of around 44% from 2024 to 2025, along with a similar reduction in refined output. Likewise, reduced export volumes are expected to persist through to 2026.
But, interestingly, some players aren’t seeing the same problems across the board. Terry Lynch, CEO of Toronto-based Power Nickel (TSX-V:PNPN), is one.
“Clearly the increase in supply from Indonesia has dropped prices, forcing projects with higher cost structures to close. This has impacted operations and investment in Australia, Asia, and Africa. It has not had the same effect in North America,” Lynch tells Mining.com.au.
“The Inflation Reduction Act has increased the importance of domestic North American mining and refining of nickel. Projects, particularly high-grade sulphide projects, will still deliver very attractive returns.”
Lynch cites Samsung’s US$18.5 million investment in Canada Nickel (TSX-V:CNC) at the start of 2024 as “proof that North American nickel is different and more valuable”.
Where to from here?
Despite the current state of the battery metals market, the prevailing consensus seems to be that things will improve. When, and by how much, remains to be seen.
Precedence Research, however, estimates the current market to be worth some US$11.65 billion, and predicts it will balloon to US$23.97 billion by 2033.
Other research firms are more optimistic, while others still are less so. The point is there’s no crystal ball — no one really knows. The best you can do is watch for the signs — population growth, electrical energy grid consumption, electric vehicle sales — and place a few brave bets.
Write to Oliver Gray at Mining.com.au
Images: Our World in Data, US Environmental Protection Agency, Sumitomo Electric, BHP
