China has been through four stages of working out what black mass is worth. Europe, on Shirley Wang's reading, is still at the first.
Wang runs pricing and industry research on nickel, cobalt and lithium at Shanghai Metals Market, along with battery materials for EVs and energy storage, and her team tracks the Chinese market and the storage channel daily. She was speaking in Budapest, at a lithium-ion battery conference SMM was hosting, where the panels had spent time arguing over what black mass even is, because every company uses its own definition.
Her answer is that the definition follows the pricing method, and the pricing method matures in steps. Europe is not short of an argument about the definition so much as early in a sequence China has already run through.
What each stage counts
In the first stage, buyers and sellers in China benchmarked black mass against the price of nickel and cobalt metal.
In the second, they moved to nickel sulphate and cobalt sulphate prices instead.
The third built on the second by adding lithium carbonate, valued separately.
The fourth is the one some Chinese companies are attempting now: counting the anode material, aluminium and other components towards the total value as well. Wang's explanation for why that has become workable is short. The market is more transparent.
Asked where China sits on its own scale, she puts it between the third stage and the fourth.
Being ahead has not made it comfortable
The gap has not translated into an easy market at home.
Competition is intense, Wang says, and small and mid-sized companies in particular have little room to make a profit. Her phrase for their position is that it is their hard time.
Feedstock is the second squeeze, and it is a matter of policy. Chinese producers of nickel sulphate and cobalt sulphate are not permitted to import black mass from overseas markets, which leaves raw material genuinely short inside China.
That is the explanation she offers for something the host had noticed on the conference floor in Budapest: companies walking around looking for more black mass.
The side of the market her team watches
On the chemicals themselves, Wang starts where most of the commentary does not.
Supply is not her concern. Lithium carbonate, nickel sulphate and cobalt sulphate all have enough capacity behind them, and enough resource. What decides the growth rate is demand, and demand comes down to EVs and energy storage.
Those two are moving in opposite directions. Global EV sales went through a fast expansion in the early years, 2021 and 2022 among them, and the expected rate of increase has since slowed for a range of reasons. Energy storage has run the other way, driven by carbon neutrality goals and by policy in different countries, and Wang expects it to keep growing rapidly.
Storage is the one she is most confident about. Wang expects its demand to increase significantly and then to keep climbing quickly beyond that.
Netted out, she still has demand growth coming in below supply growth. That leaves all three chemicals in surplus, and surplus takes prices to a lower level.
Then the part of the forecast that has a floor in it. Prices fall until they reach the cost level most producers are working at, and at that point Wang expects them to bounce back rather than keep sliding.
On how much room is left before that happens, she gives two figures. Lithium carbonate has around 30% to fall, helped by the raw materials behind it, spodumene and lepidolite, which she also sees room to decrease. Cobalt sulphate has around 10%.
Where the EU rules point
Wang's read on the European battery regulation and the IRA together is that the pressure on Chinese companies is real, and that the pressure produces movement rather than retreat.
Her expectation is that globalisation of the battery supply chain accelerates, because battery materials and battery chemicals are still distributed unevenly. Companies with the capability to respond will build new capacity closer to the demand, in Europe or in North America.
She also thinks the recycling capacity now going up in different countries should be built by learning from each other's strengths, rather than each market starting again from its own first stage.
And she names a place. Hungary, among other countries, is where she expects some of those new plants to go, built by Chinese and European companies alike.
This piece draws on the full conversation, which is available with a complete transcript on the episode page.