Outlook for electric vehicle metals positive as supply issues to keep prices at elevated levels by 2025, analysts say

The recent spike in electric vehicle (EV) materials like lithium, nickel and neodymium - driven by a demand-supply imbalance - is being gradually relieved

Prices for some EV battery and motor metals will have to be sustained at high levels to encourage production growth, says Castilloux of Adamas Intelligence

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Rising demand for electric cars coupled with supply related issues have pushed prices of metals used in electric cars higher. Photo: Reuters

Published: 9:15pm, 10 Mar 2021Updated: 9:15pm, 10 Mar 2021

Supply issues will cause prices of metals used in electric vehicles to gradually rise where they are likely to stabilise by 2025, but the current rally driven by disruptions to production, transport and speculation because of the pandemic is likely to run out of steam, according to analysts.

“In the longer term, we expect to see tight supplies for a handful of EV battery and motor metals, and we will need to sustain these higher prices to encourage production growth, but not high enough to induce consumers to engineer them out,” said Ryan Castilloux, managing director of Adamas Intelligence. “By around 2025, we will see shortages for nickel and lithium, which will slow production of batteries and EVs.”

However, the recent sharp demand-supply imbalance will not be sustained, since it was driven by delayed purchases, as well as seasonal and pandemic-driven incentives from EV distributors to revive sales and move inventories, Castilloux said. He expects the prices of the EV metals to see moderate correction in the next few weeks to months as demand and supply gradually come closer to balance, but prices will remain higher than last year’s average.

The price spike in recent months of EV materials, including lithium, nickel, copper and rare earth element neodymium, was driven by an acute dislocation of demand and supply that is being gradually relieved. Supply was pared by global shipping and logistics disruptions caused by the coronavirus pandemic, while power shortages in China because of the unusually cold weather led to the temporary closures of metals processing plants.

Neodymium-praseodymium oxide, used heavily in permanent magnets found in EV motors, saw prices rise by 78 per cent between May and January. The price of lithium carbonate, used in EVs and mobile phone batteries, has jumped 80 per cent in the past three months, after a three-year slump because of rising EV demand and slowing supply.

While the price of lithium carbonate is not expected to revisit the record high seen in 2017 any time soon, it will be sustained at higher levels as faster growth in EV sales continues to lift demand for batteries and raw materials, said David Merriman, who specialises in battery and EV materials at Roskill Information Services.