2017 the year battery metals revved up ASX resource trading
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Junior cobalt stocks have finished miles ahead of the other battery metals this year.
Notching a trifecta for cobalt, Collerina Cobalt (ASX:CLL) came in first with a whopping 1400 per cent spike.
Jervois Mining (ASX:JRV) followed close on Collerina’s heels with a 1356 per cent jump and European Cobalt (ASX:EUC) took out third place after adding 1150 per cent to its share price.
Demand for cobalt is expected to grow because of its use in lithium cobalt oxide electrodes — a common lithium ion battery technology used in electric cars.
Bloomberg New Energy Finance estimates electric cars will account for 2 per cent of the market by 2020, rising to 8 per cent by 2025 and 20 per cent by 2030.
“I think this is going to be a technology that continues to evolve and other metals will come into play,” Tim Weir, executive director of Precision Funds Management told Stockhead.
“I think definitely cobalt, lithium, graphite and nickel are going to be obviously the biggest winners, and it will continue in that vein, we think, moving into 2018.
“We’ve just seen record levels of junior companies raising capital at the moment and they’re getting flooded with demand and their share prices are going through the roof and some valuations in a lot of cases for what they’ve got are reaching fever pitch, ridiculous levels.”
Forecasts also favour lithium and anticipate that demand for the metal in electric vehicles will soon outstrip rechargeable lithium ion batteries.
“Certainly lithium has had a very good run,” Fat Prophets analyst David Lennox told Stockhead.
“We believe that commercialisation is probably now drawing close. We think probably towards the end of 2018 and looking out from next year that we’d be expecting to see a fairly good outlook for lithium.”
Financial services firm UBS predicts that strong growth for electric vehicles, related battery demand and materials will keep lithium and cobalt prices at historically high levels as supply struggles to catch up to demand.
Nickel has the most potential price upside of the battery metal commodities, according to UBS.
“Nickel appears a standout on a >12 month view as exposed to EVs [electric vehicles], only half of mine supply is battery capable and the price is below the marginal cost,” analysts noted.
Mr Weir agrees nickel is in for a good year in 2018.
“Nickel is probably a little bit of a by-product of the EV theme,” he said. “So we still think that’s in for a positive year on the back of that.”
Long-term copper gains
Longer term, copper is also set to benefit from the electric vehicle revolution.
Global electrical vehicle sales are expected to reach nearly 16.5 million by 2025, which will drive about 1.7 million tonnes of copper demand.
That is about 5 per cent of annual copper demand, which UBS argues might sound modest, but it is predicted to lead to an acceleration of demand growth sustainably above 3% per annum versus the long-term average 2.5 to 3 per cent compound annual growth rate.
“In the 2025e year, this means EVs could drive ~50% of demand growth,” UBS said. “The supply growth task is that much harder in the face of declining grades.”