One billion electric cars will be on the road by 2050, driving huge demand for some — but not all — the much-hyped battery metals, a major new report suggests.
Electric vehicles (EVs) would dominate 80 per cent of the global market by 2050 — or as high as 90 per cent with tougher regulations and faster technology development, according to Morgan Stanley’s On The Charge report.
The cost difference between battery-powered and combustion engine cars would disappear by 2025, as battery technology advances and consumer acceptance evolved.
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Morgan Stanley compared the battery technology roadmap to “the path of solar panels, whose cost fell 90 per cent in less than 20 years”.
Traditional car makers would see profit decline “sharply” from 2021 before plunging into the red from 2028.
Morgan Stanley offers good news in the short-to-medium term for ASX-listed miners and explorers pursuing battery-related metals such as lithium, nickel, cobalt and copper.
“Increased EV sales penetration is likely to underpin strong demand growth for metals used in battery production.
Even aluminium producers would benefit from demand for lighter cars and charging infrastructure.
But there would also be “losers” in the shift to EVs.
“Platinum group metals, used in catalytic converters, are under threat from the rise of battery technology.”
Over the longer term, even the battery metals such as cobalt would come under pressure with technological advancement.
Here is what Morgan Stanley says about each of the major commodities related to battery development:
Cobalt
EVs will help drive demand for cobalt eight-fold by 2025.
“We forecast average global cobalt demand growth of 6.7 per cent a year to 2025, driven primarily by an 800 per cent lift in cobalt’s use in the electric vehicles sector over the same period.”
Interest in the rare metal soared last year, lifting the spot price to near 10-year-highs around $29/lb.
“EVs are already having an impact on the price of metals used in the battery, particularly cobalt, the most expensive of the cathode materials,” the report says.
However, Morgan Stanley warns that cobalt miners faced longer term challenges due to supply constraints and questions over ethical mining.
“The cobalt industry’s ethical concerns is leading end-users to seek to reduce cobalt content in NMC (lithium-nickel-manganese-cobalt) batteries or use alternative technologies,” the report said.
“In China, the trend is towards increased cobalt usage per vehicle, as new regulations drive an industry shift towards higher energy density batteries… but in the long run, a cobalt-free battery future is possible, most likely via substitution by new technologies.”
Lithium
Similarly, forecasts favour lithium and anticipate that demand for the metal in electric vehicles will soon outstrip rechargeable lithium ion batteries.
“Rechargeable lithium ion batteries are already the biggest consumer of lithium (53 per cent of demand in 2017). But electric vehicles are now displacing electronics as the key end-use and a major new source of demand growth,” Morgan Stanly says.
Lithium production has historically been concentrated among just four producers (Albemarle, SQM, FMC and Tianqi Lithium) who delivered 86 per cent of global supply in 2016.
But as a new wave of supply comes through from hard rock miners in Australia and brine miners in Argentina, the medium-term outlook (2019 to 2022) points to a return to market surplus with prices topping out around $US11,000/t.
“That dominance is set to be eroded with the expansion of brine supply from new players in Argentina and the entry of new hardrock miners in Australia – reducing the top four’s market share to 53 per cent by 2025, on our estimates.”
Significant supply growth is in the pipeline in Australia. New mines ramping production in the near term include Mineral Resources’ Mt Marion and Wodgina operations, Galaxy Resources’ Mt Cattlin and Pilbara Minerals’ Pilgangoora Lithium-Tantalum project.
Australia could account for more than half of global supply by 2025, Morgan Stanley estimates.
While EVs will drive strong lithium demand growth, high prices “are bringing new supply into the market quickly”, generating market surpluses” the report says.
Nickel
Stainless steel accounts for 70 per cent of global nickel demand, but it is also required in the cathode of lithium-ion batteries used in EVs.
“The general trend towards higher-nickel, lower-cobalt batteries as well as Tesla’s preferred NCA (nickel-cobalt-aluminium) battery means that nickel’s use in electric vehicles is set to increase rapidly over the next 5-to-10 years.
“Rapid growth would likely put significant upward pressure on the nickel price.”
Aluminium
Tesla’s battery of choice incorporates aluminium in the cathode but demand for lower costs and increased vehicle range “is likely to further incentivise the existing push towards light-weighting of vehicles, increasing aluminium demand.
“The Aluminium Association estimates aluminium’s consumption will rise by 50kg per vehicle over the next ten years as a result.
Copper
EVs have a “dual impact on copper demand”, Morgan Stanley says. Copper will be needed in batteries as well as charging infrastructure.
Some 3 million public charging points could be needed in Western Europe alone by 2030, and 10 times that number by 2050.
Manganese
EVs will have little impact on demand for Manganese in the short-term.
“Steel dominates demand for manganese ore at 90 per cent, with EVs set to account for just 0.2 per cent of global demand by 2025.”
Oil
The transition to electric cars will have little impact on demand for oil compared to other supply challenges in the next 20 years, says Morgan Stanley.
“Our model has the internal combustion fleet growing until 2030, only starting to fall sharply after 2035.
“Even assuming rapid adoption, EVs will likely displace less than 1 per cent of current oil demand by 2025.
However, electric cars had the potential “to reduce oil demand considerably in the long term”.
Which producers will benefit?
Investors should keep an eye on the grade of metals and the bottom line when considering ASX stocks exposed to battery technology, says the chairman of boutique corporate advisory Cicero Group, Mathew Walker.
“A lot of the companies are of such a magnitude that could supply the world, but the key will be in the grade of the speciality metals,” Mr Walker said.
“Those that can produce at the lowest end of the cost curve are the only ones that will survive..
“Speciality metals is becoming a crowded space but there will only be a small number of players that come through and become successful if history is any guide.”