Demand for lithium, cobalt and graphite is shrinking as the coronavirus pandemic transforms what was expected to be a banner year for electric vehicles and battery installations into a short-term challenge to their futures, according to Benchmark Mineral Intelligence, a market data provider specializing in the lithium-ion battery sector.
In a set of reports released April 28 assessing the virus's impact on the lithium-ion battery supply chain, Benchmark lowered its 2020 demand projections for cobalt by 8.6% to 121,000 tonnes, lithium by 9% to 315,990 tonnes and graphite by 10.2% to 749,000 tonnes in response to slowing battery and traditional end-market production. The information provider decreased its 2020 projections for cathode and anode production by about 12.9% in March in response to an expected contraction in EV consumption, saying its EV penetration rate for 2020 had fallen from 3.1% to 2.7%, a decrease of 550,000 units.
Though policymakers in some countries have raised the idea of including an expansion of EV capacity as part of their economic stimulus efforts, all sections of the battery supply chain "are going to have to work through a period of unprecedented turbulence," Benchmark said.
The firmness of orders will remain in flux in the near term with leading battery companies preparing for a six- to 12-month disruption to sales, Benchmark said. "While major battery operations in China, Japan and South Korea continue, there is a steady realization that short-term orders may not be at the scale expected and there will need to be a flexibility in producer supply chains to respond to a more volatile path forward," the analysts wrote.
"Almost every section of this supply chain has been impacted in different ways, and to different extents. Those which have not will undoubtedly feel the effects in Q2," they predicted.
Benchmark said in its report on cobalt that while some refineries in China remained operational early in 2020 during the nation's lockdown in response to the virus, it became evident in March that there was "extremely low domestic demand and ailing demand from international markets."
Cobalt sulfate prices fell 10% in March with some signs of stability moving into April, in part due to fears over the security of supply from mines in the Democratic Republic of Congo impacted by a lockdown in South Africa, according to the data provided.