Electric Mobility And The Metals Fueling Its Growth

By:Amro Zakaria

In 2020, the number of electric vehicles (EVs) on the road had risen 43% year-over year globally to surpass 10 million cars for the first time, according to the International Energy Agency. The increase is in stark contrast to the contraction in registration of the conventional internal combustion engine (ICM) vehicles, which dropped by 16% over the same period

Despite recent challenges to production, such as supply chain disruptions and chip shortages, EVs continue to gain market share. In China, alternative fuel car sales surged in July by 164% year-on-year, pushing the electric car share of total cars sold from January to July of this year to 10%, according to the China Association of Automobile Manufacturers (CAAM)

Electric vehicles are increasingly becoming a primary choice for car buyers encouraged by many factors such as government tax breaks, a more extensive network of interoperable charging stations, price competitiveness, and simply superior performance and ownership cost savings

Furthermore, many governments are steering their national economies away from hydrocarbons and legislating accordingly. The Biden administration’s climate change plan promises a $2 trillion investment in clean energy to create carbon-free electricity by 2035 and aims to have 50% of the American cars sold by 2030 be electric vehicles Many investment funds have set deadlines to become net-zero carbon investors. With $226 billion assets under management, making it the third-largest pension fund in the US, the New York State Pension Fund has set a 2040 target date to become a net-zero carbon

Even companies traditionally not in the automobile industry are diversifying into the space. In 2019, Amazon led a $700 million investment in Rivian, a Michigan-based EV startup. Using electric delivery vehicles, the e-commerce giant delivered over 20 million packages in North America and Europe last year. By 2030, it plans to buy 100,000 operating vans

Also, in 2018, Google’s self-driving car project Waymo purchased 62,000 Pacifica Hybrid minivans from Fiat Chrysler and 20,000 EV Jaguar I-Pace SUVs. In 2017 Delivery and logistics giant UPS reserved 125 Tesla semi-trucks as a step towards operating an all-electric delivery fleet. Not to be outdone, rival logistics company DHL Express announced recently its plans to add electric cargo planes to its fleet

Batteries: The new oil

Countries and multinationals rush to secure a foothold in battery production facilities and the mineral resources required to produce them. Tesla, always the frontrunner announced in September 2020 that it plans to build its battery cells for the first time and would produce a staggering 3,000 gigawatt-hours a year by 2030

Likewise, Volkswagen plans to build six giant battery factories, which would provide the automobile giant up to 240 gigawatt-hours of battery capacity. To put that in perspective, the six factories would consume the equivalent of 60% of the Lithium produced globally in 2020 and an electricity capacity 12% more than the entire world consumed in 2020, according to Benchmark Mineral Intelligence

Zhejiang Geely Holding Group plans to spend $5 billion to build a 42 gigawatt-hour battery plant in Southern China. In South Korea, GM and LG Chem are investing $2.3 billion to build a 30 gigawatt-hour factory in Ohio

The electric vehicle and renewable energy industry require many metals. Here’s a look at the primary ones required for batteries

Lithium

Lithium, a key component in batteries, is extracted mainly from the so-called “Lithium Triangle,” consisting of Bolivia, Argentina, and Chile. According to the US Geological Survey (USGS), Bolivia has the largest lithium reserves, estimated at 21 million tons representing 25% of the global reserves. Argentina is second, with 17 million tons. Despite being in third place in terms of reserves with 9 million tons behind Bolivia and Argentina, Chile is second only to Australia in terms of production. The advanced production capacity is attributed to the more stable political and business conditions and a favorable climate conducive to lithium extraction. Lithium price has gone up by 138% in the last nine months.

Nickel

Nickel is the indispensable metal of the future. It has a higher energy density, greater storage capacity, and it is relatively inexpensive compared with other metals with similar characteristics and functions. Nickel is used in many log-life and rechargeable batteries and in the Toyota Prius for the first time in cars in the mid-1990s. Demand for Nickel was 60,000 MT in 2018 and is expected to increase over tenfold by 2025 according to Statista

 

The top six countries with the largest reserves are Indonesia (21 million tons), Australia (20 million tons), Brazil (16 Million tons), Russia (6.9 million tons), Cuba (5.5 million tons), and the Philippines (4.8 million tons), according to the US Geological Survey (USGS)

Cobalt

Cobolt is another primary metal for the electric vehicle and renewable energy industry, and it is essential for increasing the safety, energy density, and longevity of batteries. The Democratic Republic of Congo produces nearly 68% of the global Cobalt production. The combination of high costs of cobalt (prices around $42,000 per ton) and the production concentration risk associated with having over 50% of global production coming from a politically unstable source makes cobalt a risky metal on which to build an EV infrastructure. Nevertheless, the demand for Cobolt is expected to increase by twenty folds to successfully meet the goals of the Paris climate agreement by 2040, according to the International Energy Agency

Major producers around the world are the Democratic Republic of Congo (95,000 MT/year), Russia (6,300 MT/year), Australia (5,700 MT/year), Philippines (4,700 MT/year), and Cuba (3,600 MT/year), according to the US Geological Survey (USGS)

Copper

Traders and investors track copper prices globally to gauge global economic activities Hence, it is nicknamed Dr. Copper for its ability to ‘diagnose’ the global economy’s health. The red metal is rivaled by none when it comes to conducting electricity. Its demand is growing exponentially due to a boom in housing and infrastructure projects globally, electric vehicles, which contain five times the amount of copper in a regular internal combustion car, and wind turbines in which one tower can require 5 tons of copper. With the rising demand, Goldman Sachs sees an annual supply shortfall of 8.2m tons by 2030, representing about 34% of the global copper production in 2020

The future of mobility

There are compelling reasons to believe that the days of internal combustion engines are numbered. Automakers are already preparing for that by investing some $200 billion in EV technology over the next five years, according to AlixPartners estimates

A complete ban on internal combustion engines is gaining momentum and might come soon, with California in the US and 17 countries planning a total ban by 2035

Investors, companies, and even countries would be wise to adapt and change their portfolio allocations and national economic strategies accordingly

Author Bio

Amro is a Financial Services Industry strategist with over 18 years of experience in global markets. He sits on the advisory board as well as lectures at several universities, as a guest speaker on topics related to the global economy, geopolitics, and future economic trends

Source: Forbes Middleeast 

 

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