Electric vehicles are giving the global metals market the love it always wanted. Bloomberg Green notes that supply overhangs and the coronavirus pandemic tag-teamed this market to keep it down. However, that may be turning around.
In China and Europe, new government commitments to green and clean transport along with reductions in mining and future investments have led to the thought that the markets are bottoming out. We just have to get through the current crisis. Chris Berry, president of House Mountain Partners, says.
“The European Union, in particular, is essentially rebuilding their automotive supply chains around battery metals and incentivizing EV adoption. The Chinese have re-instituted the EV subsidy regime as well,” he told Bloomberg Green.
The article notes that earlier excitement over the future of EVs led to an oversupply of metals such as lithium and cobalt. This lowered the prices more than half from their 2018 peaks. Then, as the markets were finally becoming a bit more optimistic, Covid-19 hit the planet with the emotionally stressful force of a Cat 5 hurricane.
Every analyst in the field is expecting strong growth in the EV market in the coming years — some predicting strong growth, others super strong growth. That means a high demand for these metals.
The global market for cathodes for lithium-ion batteries will most likely reach $58.8 billion by 2024 from a mere $7 billion in 2018, according to the United Nations, an 8.4× increase.
“The rise in demand for the strategic raw materials used to manufacture electric car batteries will open more trade opportunities for the countries that supply these materials. It’s important for these countries to develop their capacity to move up the value chain,” said Pamela Coke-Hamilton, who is the director of international trade for the United Nations Conference on Trade and Development (UNCTAD).
In the realm of EVs, government incentives have helped to salve some of the pain from the pandemic’s injury to global demand. China is reinstating its love for EVs. Instead of removing its EV subsidies by the end of 2020 as originally planned, China decided to extend them to help ease the pain of Covid-19. Anyone who purchases a new EV through 2022 will get incentives.
In May, France announced a plan for an €8 billion stimulus package for the automotive industry. President Emmanuel Macron plans for part of the stimulus to bring life into local manufacturing of EVs and hybrids while also encouraging buyers to make the switch to low-emission vehicles.
“We must not only save the industry but transform it,” Macron said. He also promised to increase the government’s contribution to people buying new electric cars to €7,000, up from €6,000. France wants to produce more than a million clean energy cars by 2025 as a part of its recovery plan.
Italy is offering subsidies up to €10,000 — €10,000 if you scrap your old car or €6,000 if you don’t, versus the previous €6,000 if you scrap your old car and €4,000 if you don’t (incentives that just began last year). The UK offers purchase subsidies as well as dramatic cuts to vehicle taxes if you buy an EV, making the 3-year cost of ownership of an EV far lower than the 3-year cost of ownership of a “comparable” gas or diesel vehicle. In Germany, EV subsidies went from €6,000 to €9,000 until the end of 2021 for vehicles that cost less than €40,000, and to €7,500 for vehicles priced between €40,000 and €65,000. Additionally, “Reduced company car tax for EVs also sees a boost — the 0.25% reduced rate now applies to a raised ceiling of EVs with list prices up to €60,000 (from the previous €40,000),” and “general sales tax (VAT) will be reduced from 19% to 16% across the economy.”
Mining.com has created an EV Metals Index to keep track of the metal market, and details important parts of the market: prices paid for mined minerals at the point of entry into the global battery supply chain and the sales-weighted volume of raw materials in eV batteries. You can read more about that here.
A key part of the market to keep an eye on is lithium, and there appears to be a crunch point approaching between supply and demand. With Tesla’s battery day coming up, some suspect Tesla may announce an intent to get into the mining industry. If Tesla were to buy its own mine, this could send the metal markets out of this world. Though, this is certainly only speculation at this point.