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Cascading battery metal supply crunch to get serious from 2024, analysts forecast

Posted By: Henry Lazenby November 9, 2022

Increasing consumption will outstrip the mining industry’s ability to ramp up supply, resulting in commodity deficits as early as 2024, a new analysis by S&P Global has found.

The report, ‘The big picture: Metals and Mining,’ says that global efforts to decarbonize are driving the rollout of metals-intensive technologies, bringing about near-term challenges in the commodities sector.

On the battery metals side, government incentives and policy mandates will boost sales of passenger plug-in electric vehicles by a 28.1% CAGR (compound annual growth rate) from 2021 through 2026. Battery component supply pipelines will struggle to keep up with such a sharp rise in demand.

“Our assessment of developing lithium assets foretells healthy growth in 2023, but a failure to meet demand expectations as early as 2024,” Mark Ferguson, S&P director, wrote in the report released on Wednesday.

According to Ferguson, cobalt faces similar challenges. Although output is forecast to rise into 2024, mainly from the Democratic Republic of Congo, the metal is forecast to slip into a deficit starting in 2025. Similarly, the anticipated growth in Indonesian primary nickel supply into 2025 will postpone a deficit until 2026, when battery-related demand for nickel is forecast to hit 17.6% of all nickel demand — up from 7.1% in 2021.

S&P expects deteriorating global macroeconomic conditions to persist into early 2023, representing a downside risk to the metals and mining sector as many commodity prices slide and equity markets weakens. Producers will be hit by narrowing margins, while exploration activity will slow amid tighter financing conditions.

As the year progresses, analysts expect improving conditions once central banks gain the upper hand on inflation.

According to S&P, lower activity levels in the second half of 2022 and through 2023 will reinforce the metals and mining industry’s importance in the global energy transition.