Blue Review of the year

News Analysis




Blue Review of the year

Project Blue reflects on key market developments in 2023 across steel, EV and battery markets and related critical materials.  

These are uncertain times. While the turbulence of the pandemic feels as though its behind us, its impact lingers. COVID’s long tail is perhaps most visible in China, the country which has done most to power commodity markets over the past twenty years. China’s faltering post-COVID recovery has had direct and indirect impacts on commodity markets. It was an expectation of a strong Chinese recovery which saw commodity prices rise across the board in Q1. And it was lower-than-expected demand in China that caused commodity prices to retreat thereafter.  

Importantly, China’s economic situation has brought about domestic concerns over its weakness, which in turn has an impact on its foreign policy, as well as its foreign policy relating to critical materials.  

In July, China’s Ministry of Commerce (MOFCOM) and the General Administration of Customs (GAC) announced that from 1 August, eight items related to gallium, and six items related to germanium, could not be exported without state approval in order to “safeguard national security interests”.

The move came swiftly after the Netherlands announced new rules restricting exports of certain semiconductor manufacturing equipment on “national security grounds”. It is likely that the European state was under pressure from the USA to curb the sale of chips to China. 

China’s action had the feeling of a direct retaliation. The USA and its allies had been looking to limit the export of semiconductor technology to China, and China responded by threatening to throttle the semiconductor supply chain further upstream at the raw material level. Importantly, these actions stayed within the boundaries of the semiconductor supply chain. But in October, China imposed export controls on a selection of graphite products (seemingly without direct provocation).  

The USA performed comparatively well economically in 2023 but politically the country is polarised, divided and dysfunctional. That said, there is generally cross-party support for a firm stance on China, and through the Inflation Reduction Act (IRA), the CHIPs Act and other industrial policies, the USA continues to be combative.  

In recent weeks, the USA introduced a new amendment to its IRA which states that from 2024, no manufacturer will be able to offer a tax subsidy for an Electric Vehicle (EV) if that vehicle contains any battery components that are manufactured in or by a “Foreign Entity of Concern” (FEOC). This will be expanded further in 2025 to include any EV which contains critical materials extracted, processed, or recycled in or by a FEOC. A FEOC is any foreign entity “owned by, controlled by or subject to the jurisdiction or direction of a government of a covered nation” – meaning China, North Korea, Russia, and Iran.  

Sino-US relations matter for commodity markets (and all markets). The past year has shown that relations between the world’s two major economies are complicated, and that export controls, strict competition and protectionism related to technology are here to stay. But 2023 also gave us promising signs. In a year that has seen conflict on the rise with wars ongoing in Africa, Gaza and Ukraine, November’s APAC summit – and especially the meetings between Joe Biden and Xi Jinping – suggested that tensions could be cooling between the world’s two largest economies. Ultimately, the USA and China need each other, and their interconnectedness and interdependence is important in an unstable global environment.  


The world economy confounded most of the forecasts in 2023. At the start of the year, markets were expecting a strong rebound from the Chinese economy after the lifting of strict and prolonged COVID-19 restrictions, driven by domestic consumption and a property market recovery.

However, over the course of the year, concerns about the strength of the Chinese economy increased while effective stimulus measures failed to materialise. China’s Central Bank (PBOC) cut interest rates, but the Chinese government was unwilling to take meaningful fiscal measures, focusing instead on monetary policy.

Although Chinese GDP is likely to meet the 5% growth target set for 2023, the latest PMIs remain below the 50 mark, indicating a contracting environment. The recent announcement that the Chinese government is considering issuing a Yuan 1Tn (US$135Bn) sovereign debt package to boost the economy is a positive indication that some fiscal stimulus could be adopted in the near future. 

The US economy is set to beat expectations with 2.3% GDP growth in 2023. In Q3, it posted an impressive 5.2% y-o-y growth, driven by consumer spending and inventory investment. The resilience of the US consumer has been surprising especially given the Fed’s aggressive monetary policy, which lifted rates from 0.25% in February 2022 to 5.5% in July 2023. Part of the explanation is the amount of cash savings accumulated by households during the pandemic, estimated at US$2Tn.

US inflation has dropped over the course of 2023, with headline and core PCE falling from 4.3% and 4.7% in April to 3% and 3.5% in October, paving the way for rate cuts in the first part of 2024. Growth in 2024 is expected to slow as higher rates feed into the economy and domestic consumption slows but fiscal spending could still be a supporting factor.

Europe’s economy may escape recession in 2023, but with anaemic GDP growth of 0.7%. Germany, the EU’s largest economy, is forecast to post a -0.5% GDP contraction, due to a loss in purchasing power, as a result of high inflation and tight financing conditions weighing on consumption and investment. The ECB has been conducting aggressive monetary policy, taking rates from 0% in June 2022 to 4% in September 2023. Inflation has dropped with CPI and core CPI falling to 2.4% and 3.6% in November from 8.6% and 5.3% in January 2023. Although GDP is forecast to rebound in 2024 from its 2023 lows, the ECB will cut rates as soon as it feels comfortable with the level of inflation.  

Steel markets

Global crude steel production is likely to post a marginal increase in 2023 compared to the 1,849Mt produced in 2022. This is mostly due to higher Chinese output, a slightly paradoxical outcome given the weak Chinese economy. 

Based on annualising data from the first ten months of the year, China’s 2023 crude steel production could reach 1,050Mt, the second-highest output since its 2020 peak. Strong output is partially down to exports, which rose 35% during the first nine-months of the year to 67Mt, driven by a weak RMB. Another reason for strong output in China is that, owing to a weaker domestic economy and construction sector, the Chinese government has taken a weaker stance on environmental restrictions and has not issued mandatory cuts in steel production. Despite low profitability, Chinese mills kept blast furnace utilisation rates high this year, often above 90%, although drops related to maintenance have been seen in Q4. 

Outside of China, crude steel production has been lower than in 2022, particularly in the EU, a reflection of the weak economy. Production will also be down y-o-y in the USA, while Russia and India will post higher production.  

Meanwhile China’s stainless steel production was particularly strong this year. The key driver has been steady demand in engineering and consumer goods applications, which helped to offset declining demand from the construction sector. Increased output in China also made up for reduced imports from Indonesia, with one of the key producers in Indonesia, Jiangsu Delong, experiencing operational difficulties during the middle of the year.

Stainless steel production in Europe declined once more, in line with the weak macro environment and an extended period of destocking from producers. Although the de-stocking activity appears to have run its course, demand is likely to remain subdued over the coming months. Stainless steel production is also expected to post a decline in the USA, although end-users’ demand remains higher than in Europe for nearly all sectors.   

Bulk alloys

To differing degrees, bulk alloys trends followed those of steel and stainless in 2023. Silicon (in ferrosilicon form) and manganese (ferromanganese and silicomanganese) trends closely follow those of the overarching crude steel industry. Chromium (ferrochrome), meanwhile, lacks exposure to the 2Bnt steel industry but is used widely in stainless steel. Expectations were bright in Q1 for all markets owing to expectations of a strong Chinese economy but as noted above, this failed to materialise.  

The silicon market remains in oversupply and prices have come down accordingly in 2023. While the silicon metal market has started to rebalance, ferrosilicon remains in oversupply. As a result, ferrosilicon prices have fallen below the cost of production. The outlook for silicon metal remains bright, and there is potential for plants to convert towards metal production to provide exposure to energy transition applications. This includes the growing solar industry, but also the smaller semiconductors sector, which has been thrust increasingly into the spotlight this year amidst geopolitical tensions.

Manganese is facing the same cost issues on the alloy side as silicon. While manganese consumption in China has tracked crude steel, a glut of manganese ore arrived at Chinese ports, putting downward pressure on prices for much of the year. This was in spite of logistics issues in South Africa, from where more than half of China’s ore requirements are sourced. South Africa is on track to reach record manganese exports in 2023, owing to lower iron ore exports freeing up additional capacity.

With regard to chromium, after three years of relatively flat ferrochrome output in China during a period of furnace consolidation, the country is once again on track to see record levels. This has resulted in elevated chromium ore demand from South Africa. As with manganese, South African chromium ores are on course to hit record export levels, despite severe logistic challenges at the port of Richards Bay. In contrast to manganese trends, however, chromium ore port stocks in China are at low levels – a result of logistics issues in South Africa and record ferrochrome production in China.

Noble alloys

Molybdenum prices also tracked upwards in Q1, on the back of expectations that markets would rebound following the reversal of China’s zero-COVID policy. Chinese ferromolybdenum prices breached the US$90/kg Mo mark in February, record levels only comparable to prices seen in 2005-2008. These price rises were underpinned by supply disruptions, mainly from by-product sources from copper mines in Chile and Peru, which once again left the molybdenum market in a deficit. While prices stayed elevated for much of the year, by the beginning of Q4, molybdenum concentrate and ferromolybdenum prices dropped off as weak Chinese demand weighed on consumption and sentiment.

Vanadium prices also started the year on a strong note, with markets expecting a vigorous post-COVID economic rebound in China (and thus strong construction and rebar construction).  However, after a Q1 peak, concerns grew about the strength of the recovery especially for real estate and construction. Similarly, markets’ hope for effective stimuli from the Chinese government failed to materialise and prices followed a declining trajectory from US$9.38/lb (V2O5 China) in February to US$5.27/lb (V2O5) in November. Demand has been anaemic in Europe with prices falling, in line with the weak macro environment, while demand in the USA has been more robust, given the outperformance of the economy. Prices of ferrovanadium and vanadium nitride followed the pentoxide trend. The bright spot for demand has been in vanadium redox flow batteries (VRFBs) which are set to see strong demand again in 2023 due to new installations, particularly in East Asia.

On the supply side, vanadium output this year has been more than adequate. In China, large co-producers such as Pangang and Chengde have been operating close to full capacity, while year-to-date coalstone production between January and September increased 6% y-o-y. Meanwhile, in the ROW, even though Largo may end up posting lower y-o-y production, and Bushveld output should be flat, it seems that Evraz’ material has been finding its way through to the market, and Glencore has performed well. Although inventories are not believed to be high, it appears that end-users have been in no rush to build stocks. 

Niobium prices are characterised by their relative stability, given the oligopolistic market structure. Nonetheless, spot prices also increased in early 2023, on expectations of a strong Chinese recovery, before easing in the second half of the year. China’s ferroniobium imports peaked in March/April 2023, supported by re-stocking. Imports declined after May but are likely to have exceeded 38,000t in 2023, well above 2022 levels (33,380t) but below 2021 levels (40,527t). CBMM remains the dominant supplier, accounting for ~90% of global output. CBMM’s sales are forecast to increase 3.5% y-o-y while CMOC saw sales increase at a similar level (3.1% y-o-y) during the first nine months of the year. 

EVs and batteries 

This year has seen EV growth rates in China return to more moderate, sub-40% levels, with a number of the subsidies and tax incentives that drove domestic sales to almost double in 2022 falling away. Meanwhile, in the aftermath of the 2022 Inflation Reduction Act (IRA), EV sales growth is the USA has exceeded 50% in 2023. In Europe and the ROW, 2023 has been a mixed bag, but with EV penetration rates continuing to grow across all major markets. 

Non-EV battery applications make up around 20% of the overall secondary battery market in 2023. Energy storage applications were boosted by strong growth in renewable energy installations, while the motive battery sector benefitted from the continued uptake of micromobility applications including electric bikes and scooters. Portable electronic sales, however, continued to struggle in 2023, largely due to weak consumer demand.  

The major story for batteries in 2023 was the falling price of cathode materials, which after hitting recent highs in January, continued to fall throughout the year. China spot prices for battery grade lithium carbonate were down 76% y-o-y in November. Over the same period, nickel sulphate prices dropped by 30% and cobalt oxide prices by 35%. 

Lower battery materials costs in 2023 are likely to lead to two potential scenarios for what follows in 2024. Firstly, lower battery manufacturing costs will eventually find their way to the consumer via lower EV prices, which in turn will stimulate the next phase of growth in the lower cost EV segment. Secondly, battery chemistry technologies will continue to evolve to help protect some of the benefits brought by lower materials prices and hedge against future volatility. A range of alternative cathode materials including high-nickel NCM, high-manganese NCM and LMFP, as well as the continued development of alternative battery technologies such as sodium-ion, semi/solid state and redox flow technologies, will provide the medium-to-longer-term solutions for low battery costs and future market growth.


Lithium-ion batteries continue to drive growth for lithium compounds. Lithium demand from battery applications is forecast to have increased by 3.8% in 2023, compared to a maximum annual growth rate of 3.1% in other major end-use sectors.  

The lithium market saw high prices give way to a prolonged period of price declines in 2023. The 2022 build-up of inventories at downstream stages of the lithium-ion battery supply chain slowly filtered upstream in 2023, reducing purchasing activity and spot market trades. Prices for longer term contracts remained more stoic, though the renegotiation of prices based on trailing averages of reported spot trades saw contract prices fall back in the second half of the year for both lithium compounds and mineral concentrates.

The ramp-up of production at Core Lithium’s Finniss operations in Australia and Sigma Lithium’s Grota do Cirilo in Brazil, coupled with growing production at major incumbent Australian lithium mineral producers improved mineral feedstock supply availability. Mineral conversion capacity remains centred within the Chinese domestic market however, despite the on-going development and commissioning of mineral conversion facilities in Western Australia.  

In the aftermath of high prices and the extended price decline, merger and acquisition activity heated up. As major producers look to build their resource base for future expansion of the lithium industry, several approaches for lithium mineral assets in Australia, Ghana and the UK, along with acquisitions of lithium brine operations in Argentina were announced. The merger of incumbent producers Livent and Alkem announced in May 2023 also speaks to the scaling-up of lithium industry players to match the forecast growth in demand.  


Nickel has been the worst performing base metal on the LME exchange this year. At the beginning of December, the LME nickel cash price stood at US$16,655/t, representing a fall of almost 50% since January. Although normalising from the unsustainable highs that existed through much of 2022 and early this year, prices have been weighed down by weak end-use demand, driven by China’s below-par economic performance. 

As well as being impacted by the weak demand picture, the market is also pricing in the oversupply that exists for nickel at present, owing to the wave of nickel pig iron (NPI) and nickel intermediates flooding out of Indonesia. There are now four operating high-pressure acid leach (HPAL) plants in Indonesia, with Huayou commissioning its Huafei plant at Weda Bay in June. Exacerbating the oversupply, this year, several producers in China (and Tsingshan in Indonesia) have been taking advantage of steep nickel sulphate and NPI discounts against the LME price to produce higher-value refined nickel products, suitable for delivery on the LME and ShFE exchanges. 

In July, Huayou had its brand accepted by the LME through its fast-track process, a strategy replicated by other sulphate producers, GEM and CNGR. Others are expected to follow. In light of these supply side developments, we see a growing market surplus which now totals over 200kt this year, which will persist into next year and continue to weigh on nickel prices.


The cobalt market is in the doldrums. Cobalt prices remain subdued owing in part to sluggish demand. While there have been some bright spots in demand (especially alloy demand in North America) consumption of cobalt in portables has been weaker than expected.  

Low prices are mainly the result of oversupply, however. At present, intermediates are very oversupplied (owing to stocks and continued ramp ups in the DRC and Indonesia). There is also plenty of sulphate around with battery demand being weak, to the extent that some are converting sulphate into metal (and in doing so creating an oversupply of standard grade metal which is up massively y-o-y in China). All of this is bad news for cobalt prices but potentially good news for cobalt’s attractiveness in lithium-ion over the short-to-medium term.

Despite weak fundamentals, there has been plenty of market activity in the DRC, the world’s biggest mine producer. The DRC Government has taken a robust stance with foreign miners over the past year, with the Tshisekedi regime having been critical of some of the deals struck in the past. 

The highest profile fallout saw the DRC Government block exports from the Tenke Fungurume (TFM) operation between July 2022 and April 2023. The ban was the result of a dispute between CMOC, which owns 80% of TFM, and Gécamines, which holds the other 20% – specifically related to allegations (denied by CMOC) that CMOC had underestimated reserve levels and reduced royalties due to Gécamines. 

The total amount of the settlement payment resolving the dispute was US$800M, payable by TFM to Gécamines over six years from 2023 to 2028. As part of the terms, Gécamines is entitled to 20% of the total value of the project’s subcontracting and the right to acquire a volume of production proportional to its 20% stake in TFM on market terms and in compliance with Congolese laws. This may have set a precedent: a Reuters article published in early December suggested that Gécamines will push to secure the rights to buy copper and cobalt at other mines it has holdings in, as it attempts to build its own stocks and trade the metals.

CMOC isn’t the only company to fall foul of DRC criticism. It was reported by Bloomberg in August that ERG got a wrap on the knuckles for being too slow with project development. Then in In October 2023, ERG announced that it is constructing a new hydrometallurgical facility at its Comide mine to be completed in 2025. 


Despite weaker-than-expected battery demand it has been a positive year for manganese sulphate consumption. The market remains comfortably supplied owing to sufficient capacity in China. Undoubtably the largest news in the sulphate market was on the supply side. In September 2023, Tianyuan Manganese Industry filed for bankruptcy and announced its plans for restructuring. This development has raised questions about the completion of their anticipated 1Mtpy HP MSM project and the potential impact on Chinese HPMSM balance if the project does not materialise. Meanwhile, Q4 saw positive steps towards the financing of an ex-China manganese sulphate supply chain with Euro Manganese announcing US$100M partnership funding through Orion Resources, and Giyani Metals announcing financing of US$16M from the Industrial Development Corporation of South Africa.


This year has seen synthetic graphite capacity develop in China, and natural graphite companies and anode plants secure funding from US and EU government initiatives to develop their mine projects outside of China. It was natural graphite that first stepped into the battery space via conversion to spherical graphite to offer a lower-cost alternative to synthetic graphite. However, feedstock prices and production costs have dropped for synthetic graphite producers over the last two years, and the material has become increasingly competitive against natural spherical graphite, pushing down prices by 44% over the course of the year. OEMs often prefer to use synthetic graphite in terms of battery longevity and consistency of specifications produced. 

Looking ahead, China has announced a significant ramp-up in synthetic graphite capacity. With the steel industry maturing and plateauing in China, it seems that this capacity is targeting the battery space. Graphite supply needs to continue to ramp up to meet the growing demand for EVs. While 2023 saw the gap filled by both natural and synthetic graphite (mainly out of new projects in China), the pathway ahead will see increasing competition between the two.

Rare Earths

Prices of several rare earth compounds, particularly those consumed in magnet applications, experienced a turbulent year as the industry dealt with fluctuating supply availability, negative sentiment in the Chinese domestic market and renewed geopolitical tensions.  

The decline in Nd-Pr oxide prices from early 2023 was largely brought about by increased supply availability for light rare earths as a result of quota increases for China Northern Rare Earths Group and continued growth in imports of monazite/xenotime concentrates. Poor market sentiment and expectation of further price decreases saw weak purchasing activity, with consumers opting to run down inventories. Prices for Nd and Pr compounds rebounded in the second half of the year, though remain well below prices observed in January and February. Heavy rare earth prices also showed a sharp decline in early 2023. The closure of the Myanmar-China border and tight supply conditions saw dysprosium prices recover to a new annual peak in September, though prices for other heavy rare earths failed to show a similar recovery.

The source of heavy rare earths feedstock became a key focus for the industry in 2023, as downstream manufacturers in the west grew increasingly uneasy not only with the dominance of Chinese supply, but also with Chinese processers sourcing HREE feedstocks from Myanmar linked to local militia with poor or non-existent controls on environmental and social damage. Investment in Laotian production by several Chinese operators is seen as a move by China to reduce its reliance on Myanmar’s HREE feedstocks and remove supply chain risk for Chinese manufacturers selling into Western markets. 

Away from China, the development of new rare earth facilities and operations continued to gather pace, with the commissioning of Serra Verde’s Brazilian Pela Ema mine in Q4 and the restart of separation capabilities at MP Materials’ Mountain Pass operations in the USA. Elsewhere, Lynas Rare Earths pushed back commissioning of the Kalgoorlie cracking and leaching facility in Australia to 2024. It also extended its permit to import rare earth concentrates from its Mount Weld operation in Australia to the LAMP facility in Malaysia and acquired top-up investment from the US Department of Defence for its heavy rare earth facility in Texas, USA.

The rare earths markets remained dominated by the permanent magnet industry in 2023, both in terms of volumes of consumed products and their value. Demand from magnet end-uses accounted for 39% of total demand in 2023, increasing from 36% in 2022, predominantly targeting Nd, Pr, Dy and Tb demand, though also influencing Gd, Ho and Ce consumption to a lesser degree. On-going uncertainty by consumers on supply chain security and provenance of materials has seen further efforts to reduce rare earth permanent magnet use in key applications such as EV drive trains. Tesla, BWM and GM have all announced REE permanent magnet free motors for future model ranges. Despite the development of alternative technologies, rare earth permanent magnet based motors have remained and are expected to remain the dominant motor technology in EVs over the coming years.