Electric vehicle batteries will not deliver new supercycle for miners
Miners once told investors that electric vehicles would produce a steady stream of battery metals demand that would put an end to the industry’s cyclical nature. That promise of another supercycle remains an IOU.
Copper, nickel, cobalt and lithium are all vital inputs for EV batteries. Global sales of the batteries are up, climbing nearly half last year. This year should show 30 per cent growth, says Bernstein Research.
To convert the world’s entire fossil fuel vehicle fleet would require the equivalent of 250 terawatt-hours worth of battery capacity. That is a long way from the 0.5 TWh that was sold last year.
But any hoped-for boost for the miners has seemingly gone flat. Metal prices have performed poorly in the past year, falling by as much as half. Shares in the miners of battery-related metals such as London-listed Glencore and Brazil’s Vale have fallen towards one-year lows. Australia’s lithium miner Liontown fell a quarter on Monday as it rethinks expansion plans.
Investors fret about the weakening Chinese economy. Apart from the metals it consumes in construction, China leads the world in the production of EV batteries, with more than 60 per cent market share. The country consumed about four times the amount of copper than the EU and the UK combined in 2022, according to the International Wrought Copper Council. It is also the top user of nickel.
EV demand across China has been high. Penetration within the world’s largest auto market swelled to 38 per cent last year — more than double the global figure. Roughly six out of 10 EVs are sold in China.
Other auto markets must catch up to justify bullish metals forecasts. Recent announcements from rental car group Hertz and carmaker Ford will temper hopes of that. Hertz, previously an enthusiastic EV supporter, plans to sell a third of its EV fleet to buy more fossil fuel cars. Ford will cut output of the electric version of its popular F-150 pick-up.
Meanwhile, EV makers such as Tesla have sensibly sought efficiencies — ways to reduce their metals requirements ahead of any feared supply crunch. Future EV copper use will be less than previously expected, says consultant CRU. Last year it trimmed demand per EV estimates by a fifth to about 53 kilogrammes by 2030.
As a result, miners have begun to look elsewhere for growth. Glencore’s last deal was to acquire coal. BHP said it was reassessing a nickel project it acquired last year with Oz Minerals.
Yet again, a cycle of heavy miner investment and bullish promises could be followed by insufficient reward.
Source : ft.com
