(Ecofin Agency) – Global demand for batteries is expected to increase sevenfold by 2035 according to new forecasts from the International Energy Agency (IEA). These bright prospects come against a backdrop of falling prices for several critical minerals such as lithium, cobalt and graphite, essential components for batteries. Despite this downward trend, the IEA’s forecasts offer African countries affected by these minerals reason to hope for a recovery in the medium and long term.
In 2023, global demand for batteries has already increased by more than 40% compared to 2022, reaching 850 GWh. This increase is mainly driven by sales of electric vehicles, which represent almost 90% of total demand. According to the IEA report entitled “EV Battery Supply Chain Sustainability”, this dynamic is expected to continue, with a 4-fold increase in demand by 2030 and 7-fold by 2035, in a scenario where current policies would be maintained.
In a more ambitious scenario, where the climate commitments announced by countries are fully met, demand could be multiplied by 9 by 2035. If the global energy sector reached carbon neutrality by 2050, as predicted in the scenario Net Zero Emissions (NZE) from the IEA, demand could increase 12-fold.
Potential impact on critical raw materials markets
These optimistic forecasts for the battery market bode well for critical raw materials like lithium, cobalt and graphite. These minerals play a key role in the manufacture of batteries and are widely present on the African continent. However, these markets are currently going through a difficult period, marked by falling prices.
For example, the price of cobalt has fallen by half in two years, in a context of oversupply. According to the Cobalt Institute, a market surplus is already forecast for 2025, which could keep prices at their current levels. On the London Metal Exchange, a tonne of cobalt traded at $24,300 on January 3, 2025.
The lithium market is also at half mast: the price of lithium hydroxide has fallen by almost 90% since the end of 2022. According to Fastmarkets, prices of lithium spodumene have fallen by more than 84% between March 2023 and March 2024 Kent Masters, CEO of Albermarle, the world’s largest lithium producer, anticipates that. “Prices will stay lower for longer.”
Graphite is not immune to this downward trend. Also according to Fastmarkets, graphite prices fell by 33.43% in 2023, from $530 to $575 per tonne in December 2023, before falling to $450 per tonne in October 2024. This level remains close to the lowest recorded in 2020, or $430 per ton.
The current decline in prices of critical minerals represents a real challenge for African economies. Many countries on the continent, notably the Democratic Republic of Congo for cobalt (70% of global production), Zimbabwe and Mali (lithium producers), as well as Mozambique and Madagascar (important players in the graphite market), have relied on the exploitation of these resources to boost their economic growth. In some of these countries, fears are emerging about the viability of the strategies put in place concerning these minerals or even possible delays in the development of new production sites.
Don’t (yet) miss the boat
During the previous electric vehicle boom, which led to a significant rise in the prices of several critical metals, African countries were not sufficiently prepared and were far ahead of competitors, notably Chinese, who flooded the markets with their production . This time, in order not to miss the opportunity offered by the global energy transition by 2030 or 2035, they will have to do things differently, by addressing several major challenges, including that of the regulatory framework, the insufficiency of infrastructure, the business climate, or even labor and skills.
According to a Future Minerals Forum report which estimates that $5.4 trillion in investments will be needed in critical minerals by 2035 to support the global energy transition, Africa is at the center of global dynamics. The authors even present the continent as a “ credible alternative to China’s dominance in the refining and processing of critical minerals “, due to its abundant resources and its geographical proximity to European and Asian markets.
Louis-Nino Kansoun
Read also:
07/12/2024 – Transition: $5,400 billion needed for critical minerals, Africa at the heart of the challenges
06/12/2024 – Lithium: falling prices weaken the emerging industry in Namibia
