Electric car revolution is shaking metals markets
Bloomberg reported that the revolution in electric vehicles set to upturn industries from energy to infrastructure is also creating winners and losers within the world’s biggest metals markets. While some of the largest diversified miners like Glencore Plc argue fossil fuels such as coal and oil still play a crucial role supplying energy needs, they’ll also benefit the most from a move to electric cars, requiring more cobalt, lithium, copper, aluminum and nickel.
The outlook for greener transportation got a boost this year as the UK joined France and Norway in saying it would ban fossil-fuel car sales in coming decades. That’s as Volvo AB announced plans to abandon the combustion engine and Tesla Inc. unveiled its latest, cheaper Model 3. Such vehicles will outsell their petroleum-driven equivalents within two decades, Bloomberg New Energy Finance estimates.
Simona Gambarini, a commodities economist at Capital Economics Ltd. in London said that "For some of the metals, it’s a complete game changer. We’ve already seen a big impact on some metals like cobalt and lithium, which have soared over the past couple of years."
Electric cars contain about three times more copper than a regular vehicle, according to Glencore. Even more is needed for charging stations, with Exane BNP Paribas seeing such infrastructure adding about 5 percent to demand by 2025. Lithium, cobalt, graphite and manganese used in batteries will also see additional demand.
Glencore will get a boost as rising electric-vehicle sales lend support to copper prices, as well as from its position as the world’s largest cobalt producer, according to Jefferies Group LLC. Freeport-McMoRan Inc and First Quantum Minerals Ltd are also top picks for long-term investors looking to benefit from the trend, the brokerage said in a note Tuesday.
Markets are responding. Cobalt has surged 74% on the London Metal Exchange this year, after jumping 37% in 2016. Lithium prices have extended gains in recent years. Copper is also up 15% in 2017 on signs of resurgent economic growth, particularly in China.
On the flipside, lead producers such as Recylex SA and Campine SA may need to adapt operations to the new era. The main end-use for lead is in starter batteries for petrol and diesel engines. Electric vehicles, by contrast, are powered by lithium-ion units.
Mr Michael Widmer, head of metals market research at Bank of America Merrill Lynch in London said that “It’s a serious risk for lead demand, unless you find different applications to make up for the decline.”
Yet with lead prices up 17% this year, the best of any major industrial metal traded in London, investors see only distant risks.
"I’m not so sure things will turn out” so badly for lead, as cheap oil prices will help keep conventional cars competitive, said Herwig Schmidt, head of sales at metals brokerage Triland Metals Ltd. If demand for lead does drop, it will do so gradually, he said. “Maybe that will be the case in 10 years or so."
In the meantime, stricter emissions rules could raise demand for hybrid cars that rely on advanced lead-intensive batteries to cope with frequent engine stops and starts, according to the International Lead and Zinc Study Group.
Source : Bloomberg