Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
Lithium is having a moment — and record prices won’t deter the flurry of deals for the key battery metal.
A number of acquisitions of lithium miners have been announced in recent months, including a proposed takeover of Millennial Lithium Corp. by the world’s largest battery maker. Industry consultants, investment bankers and analysts see this as just a taste of things to come, even with skyrocketing prices for the silvery white metal that’s a key ingredient to power electric vehicles.
Lithium carbonate prices in China are at record highs after a nearly fivefold increase in the past year, BloombergNEF analysts said Wednesday in a note. The price of Chinese lithium shipped abroad has also climbed due to tight supply and stable battery demand, though at a slower pace than the domestic surge due to the absence of a spot market, according to the analysts.
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The rally comes as a global push for less polluting energy sources that has automakers and battery manufacturers racing to secure supplies of so-called future-facing commodities including lithium, copper and nickel. Two Chinese companies sparked a bidding war for Canada’s Millennial, which has lithium assets in Argentina, with Contemporary Amperex Technology Co. eventually outbidding Ganfeng Lithium Co.
That bidding war “is just a taste of what’s to come,” said Chris Berry of House Mountain Partners, a Washington-based industry consultancy. “I do see more mergers and acquisitions even at existing pricing.”
The type of capital entering the electric-vehicle supply chain is more patient than in past cycles, Berry said.
“It’s not just hedge funds riding momentum,” he said. “These are larger strategic players from both inside and outside the EV supply chain positioning amidst the decarbonization thesis.”
Chinese firms have been keen on securing strategic materials in South America in particular as they seek dominance in the EV supply chain. Ganfeng has been on an acquisition spree as the lithium market tightens. The company, which has stakes in mining operations in countries including Argentina, Australia and China, gobbled up Mexico’s Bacanora Lithium in August. CATL already had stakes in Neo Lithium, whose project is in Argentina.
“We have and will continue to see the Chinese looking to buy lithium,” said Matthew Hind, head of global mining at Bank of Nova Scotia’s investment banking division. “There will also be small-cap consolidation as well as EV companies buying stakes in mines with strategic partners in order to secure supply.”
“In other words, consolidation will be driven by several different players,” Hind said.
(By Yvonne Yue Li, with assistance from James Attwood and Joe Deaux)
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