Battery Metals

Just after Thanksgiving in late Nov 2018, General Motors (GM) announced that it was shutting down 5 factories and laying off 14,800 employees. While President Trump expressed his disapproval, the stock market approved, giving GM’s stock a modest boost. While the layoffs made headlines, many reporters, and readers, missed the prime reasons for the announced factory closures.

GM was shutting them down not only because they were making smaller sedans, which Americans no longer buy, but also because GM – like all other automakers – is switching to EVs and increasingly the autonomous variety, AEVs.

Trying to explain the reasons, GM CEO Mary Barra said, “This industry is changing very rapidly,” adding, “These are things we are doing to strengthen our core business.”

She could have been more forthcoming by pointing out that GM, like all other automakers, must quickly switch gears – literally – to a future where transportation will not only be largely electrified but increasingly moving towards self-driving EVs. Future factories, like future AEVs, will increasingly be digitalized.

In a press release, GM said it will “prioritize future vehicle investments in its next-generation battery-electric architectures” by doubling investments in electric and self-driving cars over the next 2 years. It promised to have more than 20 EV models around the world by 2023.

The cancelation of the Volt, one of the first mass-market battery-powered cars on the market, should not come as a shock. It merely signals that GM is looking past semi-electric to full battery-powered vehicles.

GM is not alone. A recent study by the Brookings Institute said that some 9.5 million jobs across several sectors will be affected — though not necessarily lost — amid the digitalization of transportation, especially in manufacturing. Automakers are increasingly partnering with hi-tech Silicon Valley firms to shift towards autonomous EVs and carsharing businesses.

And the race is on as countries with major auto manufacturing sectors try not to be left behind. Likewise, governments are promoting EVs through incentives, mandates, or a combination of both (box below).

What makes Norway special?

In the race to substitute EVs for gasoline/diesel vehicles, no country currently matches Norway in penetration rates. By the end of 2018, Norway was approaching the 300,000 mark for all-electric EVs (BEVs) and plug-in hybrids (PHEVs). While China and California have more EVs, they are no way near the Norwegian levels when adjusted for the country’s population of 5.2 million. Starting in 2019, more EVs are expected to be sold in Norway than cars using gas/diesel engines (ICEs).

Why is Norway promoting EVs? Because they can be charged from nearly 100% hydro-based system with prices unmatched almost anywhere. Every ICE replaced by an EV results in a significant drop in greenhouse gas emissions, not to mention numerous other benefits. Norway’s ambitious switch to EVs is rather ironic – some would say hypocritical – since the country is a major North Sea oil producer and exporter. Thus, every barrel not domestically used can be exported.

What’s behind Norway’s incredible success story? Generous government incentives, including:

• EVs are exempt from sales tax and VAT at the time of purchase;
• EVs are exempt from paying road taxes, toll roads, ferries, bridge tolls; and
• They get priority free parking in city centers and can use special lanes on congested roads.

When asked why they chose to buy an EV, 84% mentioned lower operating costs, followed by free toll roads and environmental reasons (accompanying chart). Norway is not only blessed with plentiful cheap hydro but generous government incentives that have decidedly tipped the preference of car buyers towards EVs.

In fact, if any Norwegian were to buy an ICE today, s/he may have a hard time selling it in a few years. Who would want to buy an ICE in a few years’ time? Which explains why the government plans to ban the sale of all ICEs starting in 2025. The way things are headed, by the time 2025 comes around, the ban may be a moot point. By 2030, Norway expects to have 1.5 million EVs on the road soaking up an estimated 4 TWhs of hydro-generated juice. The Norwegian EV Association says the existing grid should be able to handle the extra load with minor challenges.

BlackRock says EV sales will spike over the next few years

In late Nov 2018, BlackRock, the world’s largest asset management company, said it expects the sales of electric vehicles (EVs) to grow over the next 2–3 years as prices fall and more options are made available to the public. Many investors listen when big asset managers talk. As everyone knows, money talks.

Evy Hambro, BlackRock’s global head of thematic and sector investing, said the EV market is “at a tipping point for change,” adding that as more and more models come to market and price points drop, the market will spike. BlackRock’s projections are consistent with a recent report from the International Energy Agency (IEA), which said the number of electric and plug-in hybrid cars on the world’s roads exceeded 3 million in 2017, a 54% increase compared with 2016. As reported in the Dec 2018 issue of this newsletter, the IEA now projects as many as 1 billion EVs on the global roads by 2040 – roughly half of the global car inventory.

Such rapid growth comes with challenges, bottlenecks, and supply chain risks. Will there, for example, be enough nickel, lithium, and cobalt for all the new batteries, or enough charging stations, or enough renewable generation to charge so many new batteries? By 2030, the demand for cobalt, among the critical ingredients, is expected to be 10 to 25 times higher than today.

Charging up the revolution

Supplying millions of new EVs has launched a burgeoning new industry – electric charging business – thriving as the number of EVs rises. In late Nov 2018, ChargePoint, one of the biggest in the US, raised $240 million to expand its existing EV charging network. What came as a surprise – or perhaps not – were the list of investors, which included:

• BMW i Ventures;
• Siemens;
• Braemar Energy Ventures;
• Daimler Trucks & Buses;
• Chevron Technology Ventures;
• American Electric Power (AEP), among the largest US electric utilities;
• Canada Pension Plan Investment Board;
• Quantum Energy Partners;
• Linse Capital.

California-based ChargePoint is among the biggest EV charging networks in the world, with more than 57,000 charging spots across North America, Europe, and Australia. It cannot keep up with the demand.

The latest funding comes 18 months after raising $125 million for a total of $500 million since its inception in 2007. EV charging companies everywhere expect a massive the shift toward EVs over the next few years.

Globally, cumulative EV sales passed 4 million in Aug 2018 while major automotive firms switch to EVs or, in the case of Volvo, phase out ICEs starting in 2019. How can you tell that EVs are coming? In late 2018, Google Maps started displaying information on EV charging stations from ChargePoint and Tesla, among other providers. Future EV buyers want to know where they can recharge. The race is on, which explains the list of investors in the latest round of financing for ChargePoint. All major players in the automotive, oil, and electricity industries now recognize what is at stake.

Which explains why ChargePoint CEO Pasquale Romano, said, “The broader energy and mobility the ecosystem has recognized that we are at a tipping point in the generational shift to transportation electrification,” adding, “Leading investors from automotive, utilities, oil and gas, and financial institutions are coming together to enable ChargePoint’s vision of an all-electric future as the mass adoption of electric mobility and the transition to electric fleets accelerate.”

While a tad solipsistic, Romano is spot on. Earlier this year, San Francisco–based EV charging network Volta raised $35 million from GE Ventures, Invenergy Future Fund, and others while Shell Ventures put $31 in Ample, another EV charging startup.

In a few cases, the politicians are getting into the act – auto manufacturing is big business and employs millions of people worldwide. French President Emanuel Macron is among a handful of world leaders who sees the future of transport to be electric – and it clearly helps France’s desire to meet the goals of the 2015 Paris Accord. His proposal to boost the share of renewables in France funded by a petrol surcharge, however, did not go well with many protesters who do not wish to abandon their internal combustion engines (ICE) and apparently do not have easy access to mass transit or trains to commute.

Like all transitions, this one won’t be easy, with winners and losers along the way. Everybody, however, knows that EVs are coming, and nobody can afford to be left out of the race.

A study by Wood Mackenzie forecasts that global lead production, excluding that of China, will increase in 2019 by about 250 kt, which is equivalent to over 10% of current output.

According to the market analyst, approximately 90 kt are due to stem from Goldcorp’s Peñasquito, thus, developments at the Mexican mine will have a major bearing on whether the overall increase actually materialises.

Given the importance that just one actor has, WoodMac says that its prediction should be taken with a grain of salt as Goldcorp updates its lead production guidance in its quarterly reports, and it trimmed its 2018 projection by 22% in October in order to reflect a delay to the increase in output in H2 2018.

The market researcher believes that Glencore’s  Australian mines will also produce more lead in 2019.

According to the report, such an increase would be the result of the start-up of Lady Loretta in Queensland, whose contribution to the company’s lead output started to show in Q3 2018.

WoodMac is cautious when it comes to predicting whether there will be any lead coming out of the Anglo-Swiss miner’s McArthur River project in the Gulf of Carpentaria.

“It was initially abandoned in 2015 due to the need to re-design the waste rock dump as a result of the operation generating more non-benign waste rock than expected. Will the re-design be an immediate success? Increased production was envisaged in Q4 2018 and so we should soon have some idea about how it is performing,” the document reads.

When looking at China, the market researcher sees a lot of uncertainty regarding the Asian giant’s lead production and its ability to respond to its own needs in a context of environmental inspections and the closure of facilities failing to meet regulations.

In the view of Wood Mackenzie, if China turns to the rest of the world for refined lead supply, this could unveil the real situation regarding the actual availability of the mineral at a time when exchange stocks are at their lowest for almost a decade.

“China remains the dominant player for both lead production and consumption, and the slowing of the Chinese economy and fall in automotive production will not substantially change that. What is less certain is the ability of China to supply its own lead demand,” the analysis states.

The reason why the research firm doesn’t see the drop in China’s auto production impacting lead demand is that the need for replacement automotive batteries is expected to remain high given that car ownership reached 240 million units by the end of 2018, rising by 10.5% from 2017.

Electric vehicles are another reason why China’s and the rest of the world’s demand for lead is expected to rise.

WoodMac’s data suggest that for the first time, annual global EV sales exceeded 2 million in 2018, with roughly half in China.

“EVs still use lead batteries. Lithium-ion (or sometimes nickel-metal hydride) batteries provide the energy to power the EV, but the lead battery provides the energy to control the EV,” the market researcher’s report explains.

Last week, deputy minister for industry Harjanto said that Indonesia is encouraging companies and investors in Japan and Korea to get into the electric vehicle business in Indonesia at all levels. “The lower the electric vehicle’s carbon emission, the lower the tax will be. Our target is for 20% of all cars produced in Indonesia to be electric vehicles by 2025,” Harjanto said, adding that there has been discussions with Japanese and Korean automakers.

He declined to name the companies that had been engaged in talks, but Hyundai looks to be one of those. In December last year, it was reported that the Korean automaker is planning to invest US$880 million (RM3.6 billion) to produce EVs in Indonesia. In late 2017, Mitsubishi Motors had announced it was set to work with the Indonesian government to research EV infrastructure in the country. Although EVs were not mentioned, Volkswagen and Renault are also planning local assembly in the republic.

The country – which is the second largest car production hub in ASEAN after Thailand – is also aiming to work out preferential tariff agreements with other countries that have a high EV demand, Harjanto said. Alongside this is a concerted effort to also be become a lithium battery manufacturing hub in the region, in direct competition with Malaysia – which also announced such plans recently – to see which will be first to the tape.

Harjanto said construction on an ambitious US$4 billion (RM16.3 billion) lithium battery plant on the island of Sulawesi will be finished in 16 months. The Morowali site currently has 20 nickel ore processing facilities that feed 1.5 million tonnes of nickel pig iron a year into a three-million tonne-per-year stainless steel mill.

The report adds that Indonesia has plentiful reserves of nickel laterite ore, a vital ingredient in the manufacture of lithium-ion batteries, and government authorities are looking for the country to tap into those reserves to become a major regional player in lithium battery production.

London copper prices slid on Monday, easing for a second session amid pressure from concerns over slowing factory activity in the world’s biggest industrial metals consumer China.

Trading was dampened by the week-long Lunar New Year holiday which has closed markets in China.

Asia stocks hovered near four-month highs on Monday after a mixed performance on Wall Street at the close of last week, while the dollar firmed against the yen following strong U.S. employment and manufacturing data.

COPPER: Three-month copper on the London Metal Exchange fell 0.3 percent, to $6,119.50 a tonne by 0652 GMT.

FACTORY ACTIVITY: China’s factory activity shrank by the most in almost three years in January as new orders slumped further and output fell, a private survey showed, reinforcing fears that a slowdown in the world’s second-largest economy is deepening.

HOLIDAYS: “There’s a lack of trading activity because of Lunar New Year holidays in China,” said Helen Lau, analyst, Argonaut Securities. “China’s slowing manufacturing is weighing on metals markets.”

TRADE DEAL: Expectations of a trade deal between Washington and Beijing kept a floor under the market. U.S. President Donald Trump said he would meet China’s Xi Jinping soon to try to seal a comprehensive trade deal, citing substantial progress.

JOBS DATA: A U.S. Labor Department report on Friday showed nonfarm payrolls jumped by a stronger-than-forecast 304,000 jobs last month, the largest gain since February 2018. That report, along with better-than-expected ISM manufacturing activity numbers for January, pointed to underlying strength in the world’s biggest economy.

DEAL: Top copper miner Codelco said it had struck a contract deal with the union of supervisors at its Gabriela Mistral mine in northern Chile, averting the threat of a strike.

CME: The CME Group has reinstated approved status for warranting aluminium produced by United Company Rusal after U.S. sanctions were lifted against the company on Sunday.

University of Manchester researcher, Dr Thomas Waigh, Senior Lecturer in Biological Physics, has developed a technology that will make living cells and tissues more visible during analysis.

The addition of a GO (Graphene Oxide) coating to microscopy slides improves both fluorescence imaging contrast and resolution.

Dr Waigh comments: “My team has developed technology which uses monomolecular sheets of GO to coat microscopy slides, thereby eliminating background fluorescence and improving the resolution of images.”

“It’s an important breakthrough as GO is cheap and easy to manufacture in large quantities. The cost to coat each slide is estimated to be 12 pence.

“The GO coatings are biocompatible and remove background fluorescence from non-specifically bound dyes such as in live cell imaging.

And the GO coatings can be manufactured to cover different shapes and sizes of slides.”

Other applications include imaging auto-fluorescent proteins to remove background fluorescence and lining of flow cells in flow cytometry to reduce background signal from non-specific dye binding.

Dr Waigh added: “The GO layer is followed by a polymer coating to adjust the distance between the GO and the sample. The GO quenches fluorescence for any non-specifically bound dye while the polymer layer allows the stained or labelled sample to fluoresce. The quenching of non-specifically bound fluorophores means the GO coated slides are able to eliminate background fluorescence. This technology therefore greatly enhances the contrast and resolution of the microscopy images.

“The GO layer has already been tested with a range of regularly used fluorescent stains and calculations show that it will work for all dyes.”

The University of Manchester’s technology transfer office, UMI3 Ltd, is seeking to license or assign the technology to microscopy equipment manufacturers, companies working in fluorescence microscopy, life sciences diagnostics companies, scientific instrument manufacturers and optical slide manufacturers.

Domestic electric vehicle assemblers are pushing for investments in battery production in the country as they expect demand for e-vehicles to accelerate between 8-12 percent annually.

The Electric Vehicle Association of the Philippines (EVAP) already placed sales of e-vehicles to reach 200,000 units in the next six years with estimated P1.68 billion on sales of services.

EVAP President Edmund Araga told reporters at the press launch for the Nickel Initiative 2019, which is slated next month, that the 200,000 units are going to replace some of the 400,000 units of old jeepneys that are going to be phased out. He, however, explained that not all of these old jeepneys are going to be replaced by e-vehicles because some will just have to be replaced with the euro-4 engines.

Araga, who is also president of ECO PUV, Inc., also said that for this year alone they expect to supply as much as 12,000 units of various e-vehicles from trikes, jeepneys and motorcycles from last year’s 7,000 units.

But assemblers are faced with battery cost issues. Motolite is the lone car battery producer in the country and the company cannot cope with the huge demand aside from having products with different specification from that of the e-vehicles.

Besides, it also requires huge investment to put up battery production with new battery technology for e-vehicles. Araga said that battery is the single biggest component of an e-vehicle, accounting for 50 percent of the entire cost of an e-vehicle. Most of the e-vehicle batteries are imported from China, Korea or Japan.

“Battery technology, which requires nickel in its components, has always been a main challenge in our sector. The world is shifting towards sustainable energy and we can say that e-vehicles are the future,” said Araga.

The Philippine Nickel Industry Association led by Dante Bravo has partnered with EVAP and the European Chamber of Commerce and Industry to mount “The Nickel Initiative 2019: Shaping Tomorrow, Together”.

“The Philippines is the world’s second largest supplier of nickel ore and as such, it is imperative that we take the lead in discussing the future of nickel consumption and on how we can make it sustainable and collaborative so that it can drive further development not just here in the Philippines, but globally,” he said.

The conference seeks to explore global trends in nickel-consuming sectors to identify investment opportunities and areas of cooperation and collaboration. The conference also hops to serve as a platform for industries with shared interests in nickel such as e-vehicles, transportation, and stainless steel to stimulate investor interest.

Apart from e-vehicles and the transportation sector, the infrastructure, electronics, information and medical technology sectors will be participating in the conference.

Other featured industries in the event include companies involved in exploring, extracting, and processing nickel as well as businesses that utilize nickel as a key resource.