⊗

With an increased demand for electric vehicle (EV) batteries, driven mostly by climate change pressures and oil market disruptions, there will be an urgent need for strategic raw materials to manufacture them. Projections for EV sales and market penetration in the future vary widely. The number of global EVs is expected to jump more than 14 times to 145m by 2030, according to the International Energy Agency (IEA). At the same time, OPEC expects that EVs will reach a market share of 10% in 2035 and 20% by 2045, while Wood Mackenzie estimates around 100m units by 2030. As the world moves to phase out internal combustion engine (ICE) vehicles, demand for lithium, cobalt, nickel and other metals as well as rare earths vital for EV batteries will take off. EVs require roughly six times more minerals than ICE cars, meaning EV-makers will eat up an increasing share of these metals needed to make batteries. Usually not dry bulk cargoes known for their movement in large volumes today, the future looks very promising for these materials, something UNCTAD already mentioned last year. It advised commodity traders and movers to closely watch these in-demand commodities, not only for the potential growth in the primary trade of the materials themselves but also for the secondary trade of processed and refined products as these are mostly done elsewhere. Demand for nickel will outweigh supply by 2024 “Alternative sources of energy such as electric batteries will become even more important as investors grow warier of the future of the oil industry,” said UNCTAD’s director of international trade, Pamela Coke-Hamilton. “The rise in demand for the strategic raw materials used to manufacture electric car batteries will open more trade opportunities for the countries that supply these materials.” Commodities in detail Looking at each commodity in detail, estimates for all these slightly vary, depending on which analyst you are prepared to believe. Reserves of materials needed for EV batteries are particularly concentrated in several countries, making them good prospects for dry bulk movers. According to Wood Mackenzie, around 70% of world cobalt is supplied by the Democratic Republic of the Congo (DRC), most lithium reserves are concentrated in Chile, Bolivia and Argentina, also known as the lithium triangle, 80% of natural graphite reserves are in China, Brazil and Turkey, while 75% of manganese reserves are in Australia, Brazil, South Africa and Ukraine. Lithium prices have been surging throughout 2021. The prices in the seaborne Asian market posted strong gains last week while they continued to play catch-up with spiked price levels in the Chinese market, Fastmarkets reported. Graphite, which is often shipped in kegs or bags, can be carried by containers or in bulk. Its total reserves are estimated at 300m tons. The energy transition is set to benefit minor bulks such as nickel and copper in the long-term, with the demand-side to be bolstered by rising electric vehicle sales and related battery demand, panel participants said at a London Metal Exchange (LME) seminar this month. Pala Investment head strategist Jessica Fung said the nickel market’s prospects were quite bright. She judged that demand from batteries would corner 10% of the nickel market by 2025, climbing to 30% by 2030. “By the end of this decade, one-third of nickel demand is going to be used as an energy source, this is an entirely new market and drive for one of the major LME metals,” Fung said. This means that by 2030, the nickel market would need to be 60% larger than it is today to meet demand from traditional markets like stainless steel, as well as growing battery demand. Assuming the supply side delivers, nickel could overtake some commodities in the minor bulk group trades in the coming 12 months. The major countries in nickel mining include Indonesia, the Philippines, Russia, and New Caledonia. Russia’s Nornickel, Brazil’s Vale, Glencore and BHP are some of the largest nickel producers. In addition to already mentioned materials, the bauxite trade, which is the world's primary source of aluminium also used in the auto industry, has increased rapidly in recent years. Bauxite has been transforming capesize fortunes a great deal. The volume and average distance of the trade has been increasing fast - moving it from the minor bulks group. Most of the demand for bauxite comes from China, with seaborne supplies coming from West Africa and Australia. There have been some adjustments in the bauxite market lately but it is estimated to pick up as the auto industry, among other sectors, ramps up production. Cobalt is the red flag battery metal with the supply chain helplessly tied to the Democratic Republic of Congo As for rare earths, according to David Merriman at Wood Mackenzie’s commodity research subsidiary Roskill, there are two overarching trends. The first is the growth in demand from magnet applications, and the second is China’s dominance of the industry with 85% of the world’s rare earths refined products in 2020. Trade in the above-mentioned commodities is expected to grow at a fast pace as EVs start to roll off production lines in greater numbers, although the shortage of semiconductor chips has hampered the production for carmakers recently. The industry is also looking to develop new types of batteries but there are no definite moves in the ever-evolving sector which still heavily relies on lithium, nickel and cobalt reserves. Supply and demand The supply of key battery metals needs to develop to meet the transformational demand from EVs. The risks around each vary considerably and are raising the likelihood of a supply crunch. EVs will be responsible for an estimated 68% of global lithium demand and 39% of cobalt demand by 2025, according to S&P Global. Approximately 13% of primary nickel demand will come from EV-makers by 2025. "The only cloud that could potentially rain on the EV parade has to do with the materials and the supply side, but everything else is all set for this revolution to happen," said Erez Ichilov, managing director of Traxys Battery during this month's 121 Mining Investment event. "It's something that's going to take a while before everything kind of falls into place and stabilises. It's going to take a few years for these things to clear up." Cobalt is the red flag battery metal, according to Wood Mackenzie, with the supply chain helplessly tied to the Democratic Republic of Congo. “The cobalt market falls into deficit from 2027, and once EV sales take off in the 2030s, project mined and recycled cobalt can meet only meet half of forecast demand by the middle of the decade,” a recent report by Wood Mackenzie states. An analysis by Rystad Energy indicates that demand for nickel will outweigh supply by 2024. "The shortage has no other obvious solution in sight that won't tarnish carmakers with several unattractive ESG issues. Therefore, we expect Western EV manufacturers to explore alternative battery options as the nickel procurement problem becomes increasingly difficult,” said James Ley, global energy metals expert and senior vice president with Rystad Energy. The US president, Joe Biden, is said to be looking to cut the country’s reliance on industry leader China for EV materials by relying on ally countries, including Canada, Australia and Brazil to supply the bulk of the metals needed to build EVs and focus on processing them domestically into battery parts. Europe depends almost entirely on external imports for raw materials. Currently, similarly to oil, most of Europe’s battery raw material comes from outside the union. The EU has however expressed the ambition of achieving strategic autonomy on critical raw materials by looking more into their availability within its borders. "Germany is by far the country which is expected to produce the most batteries in Europe with around half of the European batteries produced there from 2025," said Lucien Mathieu, acting freight director at Transport & Environment, a European clean transport campaign group. EV-makers are feverishly innovating, seeking to slash cobalt from battery chemistries, develop solid-state technology or switch to sodium-ion batteries. Chinese battery giant CATL unveiled a sodium-ion battery in July that promises lower costs and faster charging times than lithium, but it is likely years away from application in EVs. https://twitter.com/elonmusk/status/1365055830085763081?s=20 Rystad Energy expects nickel-based battery chemistries to hold the largest share of the market by 2030, slightly ahead of iron-based batteries, with other solutions trailing far behind these two main groups. Wood Mackenzie also estimates nickel, manganese and cobalt batteries will be the dominant chemistry for the next decade at least. Now what does this mean for the dry bulk sector in terms of potential market for these high in-demand metals essential for energy transition? Nickel, which is behind steel, cement and wood in the minor bulk group trades, could switch places with one of them. Bauxite is already there with the big boys such as iron ore, coal and grains. Copper and lithium should also move up the ladder rather quickly, including cobalt when production ramps up. Technology for raw materials production from deep ocean mineral deposits is still evolving but it has significant potential to expand supply to meet growth forecasts. This could require additional vessels to ship the raw materials to onshore processing centres and from them, but we are not yet there with the technology and sustainable exploitation of the seabed. As for EVs and the niche vehicle carrier sector, if the industry manages to become less reliant on materials concentrated in a small number of countries, says UNCTAD, there is more chance that prices of batteries will drop, leading to greater take-up of EVs. It is still too early to tell how the dry bulk trades will be affected by the increasing demand for rare earth metals. In the short-term there should be a need for more vessels. “We’re going to need a bigger boat,” Constantine Karayannopoulos, CEO of Neo Performance Materials, told Metal Events’ 17th international rare earths conference. If countries focus on their domestic mining and production, in particular for EV batteries and components for renewable energy generation, we will see more finished product shipments including EVs and their batteries in the long-term.

How electric vehicle demand will transform the dry bulk trades

Electric vehicles require roughly six times more minerals than their internal combustion engine cousins, something that will have significant impacts on the bulk seaborne map

⊗

To continue reading, please login below or subscribe here.

Read Next

Costs for armed guards onboard rocket

Reining in black swans

March 2024 Review

March’s tanker rollercoaster

A sense of euphoria sweeps through dry bulk

Costs for armed guards onboard rocket

Reining in black swans

March 2024 Review

March’s tanker rollercoaster

A sense of euphoria sweeps through dry bulk

Maritime CEO Forum Singapore

Maritime CEO Forum Monaco

Advertising

Press Releases

Splash

Splash Extra

Splash Special Reports