Outlook for electric vehicle metals positive as supply issues to keep prices at elevated levels by 2025, analysts say

12-Mar-2021 Intellasia | South China Morning Post | 7:36 AM Print This Post

Supply issues will cause prices of metals used in electric vehicles to gradually rise where they are likely to stabilise by 2025, but the current rally driven by disruptions to production, transport and speculation because of the pandemic is likely to run out of steam, according to analysts.

“In the longer term, we expect to see tight supplies for a handful of EV battery and motor metals, and we will need to sustain these higher prices to encourage production growth, but not high enough to induce consumers to engineer them out,” said Ryan Castilloux, managing director of Adamas Intelligence. “By around 2025, we will see shortages for nickel and lithium, which will slow production of batteries and EVs.”

However, the recent sharp demand-supply imbalance will not be sustained, since it was driven by delayed purchases, as well as seasonal and pandemic-driven incentives from EV distributors to revive sales and move inventories, Castilloux said. He expects the prices of the EV metals to see moderate correction in the next few weeks to months as demand and supply gradually come closer to balance, but prices will remain higher than last year’s average.

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The price spike in recent months of EV materials, including lithium, nickel, copper and rare earth element neodymium, was driven by an acute dislocation of demand and supply that is being gradually relieved. Supply was pared by global shipping and logistics disruptions caused by the coronavirus pandemic, while power shortages in China because of the unusually cold weather led to the temporary closures of metals processing plants.

Neodymium-praseodymium oxide, used heavily in permanent magnets found in EV motors, saw prices rise by 78 per cent between May and January. The price of lithium carbonate, used in EVs and mobile phone batteries, has jumped 80 per cent in the past three months, after a three-year slump because of rising EV demand and slowing supply.

While the price of lithium carbonate is not expected to revisit the record high seen in 2017 any time soon, it will be sustained at higher levels as faster growth in EV sales continues to lift demand for batteries and raw materials, said David Merriman, who specialises in battery and EV materials at Roskill Information Services.

China, the world’s largest EV market, may see new energy vehicles sales jump 40 per cent to 1.8 million units this year, spurred by Beijing’s supportive policies and new model launches, according to a forecast by China Association Automobile Manufacturers.

This could see new energy vehicles battery-powered EVs, plug-in petrol-electric hybrids and hydrogen fuel-cell vehicles make up 7 per cent of total car sales. Beijing’s “Made in China 2025″ master industrial plan envisioned 20 per cent of new cars on the streets to be new energy vehicles by 2025.

Sales of new energy vehicles grew 11 per cent last year after falling 4 per cent in 2019 contrasting a 62 per cent jump in 2018 as state subsidies were rolled back.

Other EV metals, used widely in non-battery products, have also seen their price rally. Copper more than doubled from $4,617 a tonne in March last year to as high as $9,615 last month before easing to just under $9,000 this week. Nickel has risen almost 62 per cent in roughly the same time frame. Cobalt, meanwhile, has almost doubled in the past year without a major correction. Still, cobalt is roughly 44 per cent below its record price seen three years ago, while nickel is at one-third its 2007 peak.

Copper usage in EVs could amount to more than three times that of those powered by conventional internal combustion engines, according to energy and metals mining consultancy Wood Mackenzie. Roskill, meanwhile, expects the additional demand for copper from the proliferation of EVs to amount to one million tonnes in 2030, or 2.6 per cent of 38 million tonnes of total global copper demand that year.

“EVs are going to be tomorrow’s story for copper rather than today’s,” said Jonathan Barnes, principal consultant for copper at Roskill. “By 2024 or 2025, they will have a more meaningful impact.”



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