Energy transition became a near certainty for automakers in 2021.
The companies were in a wait-and-see mode. No more. Customers made their preferences known, and now automakers are committed to electric vehicles.
In Norway, internal combustion automobile sales declined sharply against EVs. Given trends, EVs should have a 100% share of new car sales by April 2022. Electric vehicle sales in China continued at a breakneck pace. Year-to-date sales are set to close out at 3 million units, up 177.4% compared to the same period in 2020, according to data from Benchmark Mineral Intelligence.
Governments are incentivizing energy transition. The European Union plans to phase out combustion-engine cars by 2035. The German government has a target of 15 million electric vehicles on the road by 2030.
With demand in clearer focus, automakers are now spending. In September, Ford Motors charted $30 billion in spending on electric vehicles. It sees EVs making up 40% of its production by the end of the decade. GM is spending $4.6 billion on a joint venture with LG Chem for battery production starting in 2023.
And the Wall Street Journal reported that nine out of 20 new vehicles introduced by Nissan over the next five years would be battery-powered EVs.
In the long term, surging demand is meeting a limited supply of copper, nickel, cobalt, lithium and all the other metals needed for batteries in electric vehicles. But next year, many battery metal prices are expected to cool after a euphoric 2021.
Copper
Copper started the year at $3.50 a pound, but it jumped and spent the fall trading between $4.40 and $4.20. The metal made some all-time highs in 2021. In the spring Goldman Sachs declared the metal is the “new oil” given how fundamental the metal is for energy transition.
Top metal producer Codelco expects copper prices to fall. CEO Octavio Araneda told Reuters that he sees a 9% drop in copper in 2021, saying the market would see surpluses until 2024.
Copper demand will be up in 2022. In October, the International Copper Study Group wrote that refined copper usage is expected to remain essentially unchanged in 2021 and to grow by about 2.4% in 2022.
“[Copper] is essential to economic activity and the modern technological society. Additionally, infrastructure developments in major countries and the global trend towards cleaner energy and electric cars will continue to support copper demand in the longer term,” writes the International Copper Study Group.
Easing concern about copper supply is rising production.
“After three years of remaining essentially unchanged, world copper mine production, adjusted for historical disruption factors, is expected to increase by about 2.1% in 2021 and 3.9% in 2022,” wrote the International Copper Study Group in October.
New mines are coming online notes the ICSG.
“Following a four-year period where only two major copper mines were commissioned, the pipeline of copper mine projects is improving. Major projects starting in 2021/2022 include Kamoa Kakula in the D.R Congo, Quellaveco in Peru, Spence-SGO and Quebrada Blanca QB2 in Chile and Udokan in Russia. A number of medium and small projects are also expected to come on stream.”
Cobalt
Cobalt prices nearly doubled in 2021, starting the year just above $15 pound and now trading near the $30 a pound mark.
Supply chain issues and increased demand will support the metal for the beginning of 2022, but then look for prices to soften, writes S&P Global Market Intelligence in a November note.
Analysts at S&P expect cobalt prices to drop 8.3% in the latter half of 2022 as bottlenecks ease.
However, cobalt demand will continue to grow due to energy transition. There will be substitution and thrifting, which will dampen demand. S&P forecasts that total cobalt demand to rise to 195,000 mt in 2022, up from 132,000 mt in 2020 and an estimated 170,000 mt in 2021.
Nickel
Global finished nickel demand is forecast to grow 15% in 2021 to reach 2.7 million tonnes. Importantly, nickel demand is expected to continue to grow, hitting 2.9 million tonnes in 2022 and 3.0 million tonnes in 2023.
In November, the Australian Government’s Department of Industry, Science, Energy and Resources released their report on nickel.
Stainless steel still constitutes the majority of global demand for nickel, despite the burgeoning EV sector. Stainless steel production is estimated to increase by 15% year-on-year for 2021, supported by government stimulus spending. However, it is likely to taper towards around 5% a year in 2022 and 2023.
At the same time, DISER said that expectations of future nickel consumption growth are primarily driven by the battery sector.
“Accelerating demand for electric vehicles, as part of government stimulus measures to offset the impact of the COVID-19 pandemic, combined with ongoing moves in decarbonization, is driving increased demand for nickel,” the authors of the report noted.
Demand for nickel for batteries is forecast to double over the outlook period, as battery factories come online both inside and outside of China.
By 2050 Glencore expects 3.7 times growth in nickel demand when compared to 2019 levels. Woodmac believes that nickel demand from EVs could quadruple by 2040. The bullish outlook for the metal helped it hit a seven-year-high in 2021.
Indonesia and China have been investing heavily in nickel production, which has dampened prices and outlook for the metal. In December, China’s Tsingshan Holding Group announced that it had officially started producing a type of nickel that was almost ready for use in electric vehicle batteries.
Lithium
Lithium is finishing the year on a strong note.
“Prices for lithium carbonate in the Chinese domestic market see a significant increase in the first half of December, as buyers look to restock inventory ahead of the Spring Festival,” wrote Benchmark Mineral Intelligence in a December note, also observing that lithium hydroxide was up, too.
Both lithium carbonate and lithium hydroxide prices are up sharply with lithium carbonate for batteries up 394% to RMB 200,000 and lithium hydroxide running up 275.3% to RMB 193,000.
“Contacts reported to Benchmark that some Tier 2 and 3 lithium chemical conversion plants will be forced to moderate production in H1 2022 due to a lack of feedstock, indicating a worsening supply-side deficit in the face of exceptional demand,” writes Benchmark.
