While South Africa’s renewable energy sector has been gaining momentum in recent years, driven by the country’s commitment to reducing carbon emissions and diversifying its energy mix, the local market’s growth is closely tied to global trends, particularly in the electric vehicle (EV) and energy storage systems (ESS) industries, as well as the global push towards ESG-related operational matrixes.
As the world’s thirteenth-largest producer of nickel, a key component in EV batteries, South Africa’s market is vulnerable to fluctuations in global demand and prices. Recently, the global battery cell market has experienced a price drop, driven by declining metal prices and reduced demand for electric vehicles (EVs).
Despite rising EV sales, higher interest rates and economic uncertainty in major markets have slowed consumer demand, including a year-on-year growth slowdown in China, the largest market. This has resulted in a 9% decrease in LFP ESS cells, while NMC EV cells remained stable in July. The oversupply of battery metals has led to a sharp decline in prices, with lithium plummeting 70% and nickel falling 40% this year. This downturn raises concerns about the transition to renewable energy and highlights the volatility of critical minerals, particularly with China’s dominance in the battery market and its impact on mines in the Global South, which supply most of these materials to Asia.
Lower battery cell prices could spur domestic ESS assembly.
The ongoing decline in cathode prices, combined with falling prices for key battery metals like cobalt, nickel, and copper, has led to lower battery material costs and a slight decrease in battery cell prices. This trend could have a positive impact on downstream battery assembly markets. In South Africa, there has been a notable increase in battery assembly firms using imported modular components from China, and reduced input costs could bring relief and benefits to this growing sector, which serves the embedded generation, state-driven IPP projects, and rooftop solar markets.
However, electric vehicle sales remain unaffordable in South Africa, and the technology has yet to gain traction in one of Africa’s largest economies, which is currently experiencing high interest rates and economic uncertainty, leading to decreased consumer demand.
On the other hand, the price reduction could have negative consequences for large miners, potentially leading to project mothballing, costly divestments, and job losses.
Global majors edgy about Nickel
Nickel producers, including BHP and Anglo-American, are cutting production due to low prices and rising costs, which will likely lead to reduced output in South Africa, the world’s thirteenth-largest nickel producer in 2023. This trend is already evident in the country, where Anglo American recently announced a significant restructuring, involving the demerger of its 79% stake in Anglo American Platinum (Amplats) and the sale or demerger of De Beers, amid a platinum surplus that has depressed prices. Anglo owns Mogalakwena Mine in Limpopo , which is South Africa’s largest nickel-producer. The Nkomati Mine, also located in Limpopo and operated by African Rainbow Minerals Ltd, founded by billionaire Patrice Motsepe, comes close in second. BHP has taken measures to adapt to the challenging market conditions, announcing in July the temporary suspension of operations at its Western Australian nickel businesses from October, due to oversupply and anticipated price declines. Earlier in February, BHP halted operations at its Kambalda concentrator, placing it into care and maintenance from June. The suspension will affect mining and processing operations at several facilities, including the Kwinana refinery, Kalgoorlie smelter, and Mount Keith and Leinster mines, while development of the West Musgrave project will be put on hold.
