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Separating battery metals market hype from reality

Battery metals are in the news—for good reason. Demand for these metals is expected to skyrocket, driven primarily by powertrain electrification.
Separating battery metals market hype from reality Separating battery metals market hype from reality Separating battery metals market hype from reality Separating battery metals market hype from reality Separating battery metals market hype from reality

'We expect lithium prices to level out at about US$10,000 per tonne of lithium carbonate equivalent (LCE) in 2025, and hit the $12,000 range in the longer run'

Tycho Möncks, Benjamin Chew, Marc Schmidt and Clement Kwok*

As we explored in The Boston Consulting Group's Future of Mobility study, car buyers' total cost of ownership, along with ever-stricter environmental regulations, constitute the major forces fuelling penetration of electric vehicles (EVs) in the automotive market. Indeed, BCG analysis suggests that, globally, the share of all EVs (including hybrid cars) could reach roughly 30% of manufactured vehicles by 2025 and as much as 50% by 2030 (though electrification will manifest itself differently in regions around the world). For fully battery-operated EVs, those global numbers may reach 6% and 14%, respectively (figure 1, below). 

Given the hype surrounding battery metals these days, mining companies may be tempted to swiftly ramp up capacity to satiate demand. But, they risk falling into the ‘supercycle' trap—whereby companies develop new mines on the assumption that demand and prices will continue increasing. History has shown that markets can turn all too suddenly, driven in part by producers' over-eagerness. Too much supply floods the market, and prices plummet. 

To avoid this scenario, miners must use a cool head to assess the opportunities and risks presented by the battery metals market. They need to draw on facts (not sentiment) to develop the best-informed perspective, and then use this more informed view to craft their business strategies. In this article, we examine trends in current battery materials dynamics and outline implications for miners.

Lithium, nickel and cobalt: The big three in EV battery technology today

To build a realistic understanding of the battery materials market, we suggest that miners avoid relying solely on the ‘voice of the market' and instead consider a fundamental long-term perspective on supply, demand and price dynamics for lithium, nickel and cobalt—the metals currently dominating battery technology (figure 2, below). Drawing on BCG's Commodity Market Insights (CMI) framework, we have developed such outlooks for each metal.


Current EV battery technology is predominantly lithium-ion based, where lithium, nickel and cobalt are the primary raw materials required. Considerable hype surrounds the lithium market, with many observers expecting a shortage of supply that will trigger a struggle among battery manufacturers to source this material. But BCG analysis suggests that sufficient supply will come online in the medium term to satisfy demand. Coupled with innovations in production technology (such as chemical processing of brines), this development will keep prices from exploding. However, the lithium market still lacks sufficient spot volumes, and that could make it difficult for battery producers to source lithium materials with suitable specifications in the short term.

With all of this in mind, we expect lithium prices to level out at about US$10,000 per tonne of lithium carbonate equivalent (LCE) in 2025, and hit the $12,000 range in the longer run. This medium-term price outlook is based on the assumption that developing capacities will be comparably well positioned on the global cost curve.

This outlook seems to contradict recently reported price spikes in lithium transactions. However, our analysis suggests that price levels substantially exceeding $10,000 are driven not by fundamentals, but by a not-yet-liquid market coupled with fears of shortages—making buyers less sensitive to price.


Nickel is generally not scarce, but tightness in nickel Class 1 material (required for battery manufacturing) is around the corner. We anticipate solid demand growth, especially for Class 1 nickel, driven by the EV market, and drop in inventory levels as soon as 2019, which would prompt a supply deficit in the market. To mitigate this deficit, the market requires either processing of laterite ores into Class 1 material or the development of high-cost sulfide deposits, production of which can be directly used for battery-grade nickel. Both production routes come with high operational costs, so we expect Class 1 nickel prices to rise and even become decoupled from lower-grade indices.

Battery-grade nickel prices will likely exceed the $20,000 per tonne threshold in 2021 and then stabilise slightly below $20,000 by 2025

Specifically, battery-grade nickel prices will likely exceed the $20,000 per tonne threshold in 2021 and then stabilise slightly below $20,000 by 2025. Mining companies are already showing more willingness to step up their expansion capex, which adds to the supply of nickel in the medium term. But even those large-scale developments will be operating towards the right-hand side of the supply cost curve, keeping longer-term prices well above today's levels. Indeed, BCG's CMI results lean towards the higher end of analysts' forecasts through 2021. In the longer run, they fall slightly and oscillate around the analyst average.


It's no secret that substantial risks surround the supply of cobalt. As much as 65% of the global supply of this metal comes from the Democratic Republic of Congo (DRC), an unstable jurisdiction often associated with perceptions of unethical mining practices. Prices skyrocketed during 2017 and early in 2018. BCG proprietary analysis shows that the spike was caused in part by battery producers' stockpiling efforts as well as financial investors' securing of physical volumes of cobalt.

But these moves have artificially inflated prices. Examined through the lens of market fundamentals, cobalt is not as scarce and ‘at risk' as many believe. On-the-ground supply-side observations, especially in the DRC, reveal that ‘fresh' supply of cobalt will hit the market. Also, at price levels beyond the $40,000 per tonne range, it may become economically advantageous to re-treat tailings volumes and change metallurgical processes to boost cobalt recovery from mixed deposits, though this could reduce recovery rates for other metals in those deposits, such as nickel and copper. Multiple mining companies have begun doing both to increase recovery from primary mined ore as well as from tailings. The ‘fear factor' of relying on potentially dubious supply from the DRC will also likely ease up, as governments, mining companies and industry bodies step up efforts to trace cobalt production from ‘cradle to grave', applying digital innovations such as blockchain.

Taking such developments into account, BCG's perspective on price trends for cobalt is strongly contrarian. While analyst consensus suggests sustained price levels beyond the $80,000 mark, we believe that prices have passed their peak levels and will substantially drop in the short to medium term. Unless there are sustained interruptions in DRC volumes (which we view as unlikely), medium-term price levels exceeding $40,000 per tonne are not justified by fundamentals.

Implications for mining companies

Mining companies seem caught between the proverbial rock and hard place.

They must avoid investing in production capacity that might be loss-making down the road. But simultaneously (and for good reason), they should also capture the opportunities that battery materials present. By strengthening their understanding of the pricing mechanics for these metals, they can avoid overpaying for assets and can mitigate the risk of engaging in loss-making developments.

We also suggest that they consider alternative means of project financing that can shield them from the worst impacts of price collapses. Examples include joint-venture agreements with battery producers (who are eager to engage in such structures to secure their long-term raw material supply) and streaming agreements with automotive OEMs (who co-invest in the development of a new mine in return for rights to receive certain output volumes once the mine is operational).

Miners should also start looking beyond lithium-ion-based battery technology to the next wave of battery innovation. Most important, they need to consider the new raw materials that may be required to support those innovations—and tailor their longer-term business strategies accordingly. These potential new materials include vanadium, magnesium and zinc (among others), and each will come with its own strengths and risks.

The sirens' song of the battery metals market may (understandably) be hard to resist. But savvy miners will tune it out so they can objectively gauge the market's opportunities and risks.

They will keep the supercycle trap front and centre in their minds—and take steps to avoid it. By staying current with the outlooks for lithium, nickel and cobalt; exploring novel finance mechanisms; and anticipating tomorrow's battery technology innovations, miners can prepare themselves to pivot as needed to succeed in this volatile market.

*Tycho Möncks ( is a principal, Benjamin Chew (  a lead knowledge analyst, Marc Schmidt ( is a partner and managing director, and Clement Kwok ( a senior knowledge analyst at The Boston Consulting Group.