Electric vehicles buoy global metals market

Hot item: An electric charge socket sits exposed on a Skoda Superb hydrid automobile in the Czech Republic. Global electric-vehicle sales are returning to growth, stimulating the metals market. — Bloomberg

NEW YORK: The market gloom over the metals that will power the cars of the future is starting to lift.

Supply overhangs and then the coronavirus pandemic had crushed short-term prospects for the minerals used to make rechargeable batteries. But new government commitments to green transport in China and Europe, as well as curtailments to mining and future investments, have led to a growing consensus the markets are bottoming out.

Add in the fact that battery technologies are continuing to get cheaper, and there’s reason to be bullish “over the next few years once we get through the current predicament, ” said Chris Berry, president of House Mountain Partners, an industry consultant.

“The European Union, in particular, is essentially rebuilding their automotive supply chains around battery metals, and incentivising electric vehicle (EV) adoption, ” Berry said in a phone interview. “The Chinese have re-instituted the EV subsidy regime as well.”

Exuberance about the future for electric-powered vehicles led to an oversupply of metals such as lithium and cobalt, sending prices tumbling by more than half from their 2018 peaks.

Then just as some optimism was returning to the markets, the coronavirus pandemic triggered a demand slowdown that clouded recovery prospects for those metals as well as nickel.

While shorter-term forecasts have been reduced, the longer-range outlook remains impressive. BloombergNEF predicts global electric-vehicle sales will return to growth over the next few years, rising from two million last year to 8.5 million by 2025, then climb to about 26 million by 2030.

The worldwide market for cathode for lithium-ion batteries, the most common type in rechargeable cars, is expected to reach US$58.8bil by 2024 from US$7bil in 2018, according to a United Nations report.Those outlooks leave the world’s largest producer of lithium expecting a market turnaround by 2022.

Demand “is starting to come back” with spot prices about at a bottom now, Albemarle Corp’s new chief executive officer Kent Masters said in an interview. “It will ramp up and use up that excess supply. And in time, there’ll be a play where demand outstrips supply and pricing will change dramatically.”

For lithium, delays of new and expansion projects will help the supply glut. With only a few producers making money at these levels, “you’re starting to see less production of lithium – a complete contraction of the production of it, ” said Andrew Bowering, a director at explorer American Lithium Corp.

“New projects that were scheduled to come on are not coming on, and there’s going to be a supply crunch of lithium some time within the next couple of years.”

Citigroup analysts now expect battery-grade lithium prices to surge by about 42% in 2022 from current levels thanks to “rising conviction” on electric-vehicle demand from new Chinese and European EV incentives as well as accelerating rationalisation in supply.

Cobalt faces similar supply constraints in top producer Democratic Republic of Congo due to the pandemic. — Bloomberg

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