Andy Home: The recovery of battery metals is affecting the EV market.

The battery metals bubble has passed its peak. The prices of cobalt, nickel and lithium have all recovered from their lows in 2024-2025. The story has been largely a tale of supply restraint. Since February of last year, the world's largest cobalt producer - the Democratic Republic of Congo - has limited exports. Indonesia, which has a similar grip on the nickel supply chain as well, uses quotas in order to control its rogue mining industry.

Lithium’s recovery is largely due to the market. The two years of ultra-low prices have taken a toll on both existing producers and new projects. The suspension by the Chinese authorities of Jianxiawo's giant lithium mine helped.

It is still a work-in-progress, and the immediate price changes are dependent on policymakers in Kinshasa. Jakarta, and China's Jiangxi Province.

Some of the gloom that had previously hung over these markets has now lifted. Now the focus is on whether the demand will be strong enough to support higher prices.

BUMPY ROAD

Demand for battery metals has continued to grow despite the recent supply-demand cycle.

According to the International Energy Agency, global lithium-ion batteries will be deployed six times more in 2025 than they were in 2020.

Electric vehicle (EV) deployment, which is responsible for 70% of the total lithium-ion batteries deployed, has been a major driver.

After a 20% increase in sales year-over-year by 2025, the EV market has hit a rough patch this year.

According to Benchmark Mineral Intelligence, the global sales growth rate was only 0.9% from January - May.

However, the headline figure does not reflect regionally distinct performance.

Sales in North America dropped by 25% on an annual basis, due to the elimination of U.S. Tax Credits in September.

China, which is the largest EV market in the world, saw its sales drop by 15% during the first five month of 2026. The decline in battery demand was partially offset by the shift towards larger vehicles that require larger batteries.

Europe registered a 26% growth year-on-year, while the rest of world grew even faster, at 89%. This is due to an increase in Chinese EV exports - particularly into the rest Asia.

POWERING UP

Grid-scale batteries are rapidly becoming a major lithium demand driver.

According to the IEA, global installations have 'grown more than twenty-fold in the past five years.

Battery demand is increasing as renewable energy systems are being implemented globally. This will improve grid reliability in the event of a power outage or if the wind and sun don't blow.

China has already completed half of a three-year program to double the new energy storage capability to 180 gigawatts before 2027. Beijing will need to install more installations if it is to reach its five-year goal of generating 50% of the nation's electricity from renewable sources by 2030.

Battery storage helps lithium offset the growth of sodium-ion battery in the Chinese automobile market, but little for cobalt and nickel.

Grid storage batteries use lithium-iron-phosphate (LFP), which contains neither metal.

NOT ALL BATTERY METALS ?CREATED EQUAL

In the ever-evolving race to find cheaper and more efficient chemistries, not all metals in battery cells are created equal.

According to the IEA, LFP has a 50% share of the market for both automotive and energy storage batteries.

Some Western automakers are hesitant to use a chemistry that is dominated by China.

For now, nickel and cobalt are holding their own.

Adamas Intelligence, a consultancy, provides a monthly snapshot of metals used in passenger electric vehicles.

The?average amount used of lithium per battery in April was up 7% on the year, reflecting a shift to LFPs and larger batteries. However, the average usage of cobalt and Nickel remained unchanged.

PRICE PROBLEM

Battery prices are higher when the metal price is higher. This can act as a drag to demand.

Prices of lithium carbonate may be already testing the buyers' capacity to absorb an increase that has nearly tripled since mid-last year.

Project Blue analysts estimate that the current price has reached break even levels for certain grid storage projects. They warn that "the threat of demand destruction increases if prices continue to rise."

This is a good reason to think that the recent "battery metal boom" won't be repeated.

Market forces and policymaking are now inextricably linked, adding an additional layer of uncertainty to metals that were previously defined by the inability to match supply with demand.

Andy Home is a columnist at. This column is great! Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.

(source: Reuters)