Will China’s metal stockpile drive up battery prices?

By Metal miner

MMI for renewable sources (Monthly metals index) continued to plateau, moving sideways with only a slight decrease of 1.29%. Currently, there is not enough bullish or bearish price action to take the index too far from its sideways trend. The volatile historical movements in grain-oriented electrical steel prices are currently the only factor adding significant volatility to the index. However, there is also the fact that China is currently home to a vast stockpile of battery metals such as lithium and cobalt, minerals essential to green energy initiatives.

These stocks continue to put downward pressure on battery metal prices due to market oversupply. However, the situation is more complicated than falling prices and overstocking. In the area of ​​global trade, this could have consequences for the international market for batteries and renewable energy; some of which are not yet apparent and many of which relate to geopolitical tensions and supply chain disruptions. Whenever a single nation stockpiles any essential raw material, access to supply could witness long-term pitfalls.

Stock of battery metals in China

In recent years, China has stepped up its efforts to stockpile a wide range of battery metals critical to making batteries, including cobalt and lithium. Although largely unnoticed by the general public, this strategic move has significant implications for global markets, particularly for American companies that depend on sourcing these critical resources from China.

The extent and scope of China’s storage

China metal stockpiling is not a new phenomenon. However, the scale of the current process is unparalleled. Even more problematic is the fact that metals are essential for making batteries for electric vehicles and other high-tech uses. Because they are so vital to the world’s transition to sustainable energy, they are extremely valuable strategic resources.

China’s accumulation of these raw materials stems in part from a need to protect its industrial and economic future. In addition, it has become the leading producer and consumer of many of these vital elements due to its attempts to control the battery worldwide. supply chain.

Reasons behind China’s battery metal stocks

China continues to stockpile resources for a number of reasons, both geopolitical and economic. First, China wants to prepare for any future geopolitical upheavals and disputes, especially regarding Taiwan. Second, China is acting to protect itself from possible currency depreciation. Facing difficult times, the nation hopes to preserve economic stability and save its wealth by turning financial assets into resources such as gold.

Maintaining long-term control over supply chains is another benchmark of China’s industrial policy. This means securing access to raw materials and taking control of the extraction, processing and refining of these metals – areas in which China now holds substantial importance. global market share. In the face of these challenges, however, supply chain stability can be achieved through reading The art of timing your metal purchase.

Impact on US Buyers

China’s stock of battery metals they pose a challenge to the US companies that depend on them. Many analysts expect prices to eventually rise due to China’s actions, which continue to create tight supply and higher demand. This will make it even more expensive for American companies to get the goods they need. The situation is particularly worrying for sectors that rely significantly on these vital resources, such as consumer electronics and renewable energy.

US businesses should consider a number of techniques to reduce potential risks. An alternative is to diversify sources of supply. However, since China dominates the world market for many of these minerals, this is easier said than done. Another strategy is to build domestic production capacity. However, this requires time and a considerable amount of money commitment to scale.

Tactics to help reduce supply chain pitfalls

Other tactics involve establishing long-term alliances with suppliers in different parts of the globe where there are significant sources of these vital metals, such as Australia, Canada and south america.

Reducing dependence on these metals also requires innovation. Developments in battery technology, such as the creation of new materials or improved recycling techniques, can help mitigate the effects of China’s stockpiles on American companies. Meanwhile, those businesses should also try to establish more robust supply chains by minimizing the amount of raw materials required for production or by recovering metals from discarded products.

Grain Oriented Electrical Steel MMI

Continuing on the path of wild volatility, the MMI for Grain Oriented Electrical Steel (GOES) saw a sharp month-to-month price increase, rising 20.41%.

A projection for growth, but a reality of supply shortage

The grain-oriented electrical steel market has captured some attention in recent weeks as industry dynamics continue to evolve. Many anticipate that the electric steel market in North America will continue to grow, reaching USD 6.46 billion by 2031. The projected increasing use of electric vehicles and upgrading of energy infrastructure, particularly in the US and Canada, continue to drive much of the these. forecasts.

However, supply chain issues persist as manufacturers continue to ramp up production to try to keep up with demand, especially when it comes to ensuring the availability of high-quality electrical steel needed for high-end applications.

Furthermore, although forecasts state that the global market will expand at a compound annual growth rate (CAGR) of 4.7% between 2024 and 2030, industry participants continue to closely monitor supply shortages that could hamper sector growth. The rapid pace of electrification continues to outpace supply despite improvements in manufacturing capacity. This raises concerns about the possible future blockages.

By Jennifer Carey

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