So will we see years and years of ever-rising demand for key metals like lithium nickel, copper, cobalt, the PGE elements and aluminium?
And what role will secondary metal sources play in meeting supply – recycled metals from broken down batteries and other products?
Here we present two somewhat opposing arguments on the matter.
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Some bullish forecasts this week on metal needs in a renewable economy from BHP and commodity trader Trafigura, with upbeat projections on electric vehicle (EVs) sales.
These types of projections are becoming commonplace as the world moves towards the final great surge of the industrial revolution – electricity and renewables.
But later there’s a study that should be a timely reminder of the caution investors should bring to the way they assess these forecasts.
First up some scene-setting, starting with Vandita Pant, BHP’s Chief Commercial Officer who told the Financial Times Commodities Asia Summit in Hong Kong this week that global markets will need four times the nickel and double the copper in the next 30 years to facilitate a decarbonised world.
“Some of the modelling that we have done showed that in, let’s say a decarbonised world … the world will need almost double the copper in the next 30 years than in the past 30,” she said “And for a commodity like nickel, that quadruples. So four times nickel needed for the next 30 years than the past 30 years and all to be done as sustainably as possible,” Pant added.
On Tuesday, Trafigura’s chief executive, Jeremy Weir warned of possible significant deficits for copper, nickel and cobalt as global demand rises.
“Some of these metals are just not going to be available due to the increase in demand,” he said.
“We’ve already seen a significant increase in demand not just from China but also from the U.S. and from Europe and we expect to see significant deficits in some commodities,” Mr Weir said.
Weir said cobalt, nickel supplies could also become problematic unless companies are able to commission mines more efficiently without compromising safety standards.
He said nickel from certain locations, like Indonesia, for example, has a very high carbon footprint compared with other sulphide-based producers.
Trafigura is investing in carbon capture and storage and Weir said carbon trading could become Trafigura’s third pillar of business after the business was launched in April.
Both nickel and copper are poised for strong rises in consumption as a result of the transition away from fossil fuels. Nickel is used in electric vehicle (EV) batteries while copper is needed for wiring in the EVs, their charging stations and other renewable energy infrastructure such as wind farms.
Traceability and sustainability will be some of the main requirements from clients from now on, BHP’s Pant said on Wednesday.
She gave as an example that BHP has done a blockchain traceability program with Tesla to track carbon emissions of its Western Australian nickel mines and processing assets.
Meanwhile a new estimate from Bloomberg NEF (BNEF, Bloomberg New Energy Finance) reckons around 5.6 million electric passenger vehicles (EVs/NEVs in China) this year.
That would be almost double the number purchased last year and almost 8% of all vehicle sales in calendar 2021.
But the share is reaching higher in some regions, especially Europe.
BNEF points out that EV sales are 20% or more of total vehicle sales for several European automakers, including Volvo (now Chinese-owned) and Daimler.
All up there are more than 500 models of EVs and fuel cell vehicles available for sale today — just six years ago, that figure was less than 100.
BNEF also says that installation of chargers is also growing quickly with an estimated 2.1 million vehicle charges to be installed in 2021, according to BNEF.
But it isn’t just cars. BNEF reckons commercial buyers to purchase 150,000 electric vehicles this year, also nearly double last year’s tally. These will range from pick up style commercial vehicles to urban delivery trucks (Amazon wants Rivian to build 100,000 electric vans by 2023), mail vehicles and vans for the likes of Fed Ex and UPS.
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All up very bullish. Now for a necessary corrective to the belief that it’s going to be years and years of unending growth for green metals and associated products.
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The CSIRO is the country’s home of great scientific research and advice and it has been looking more closely at future demand and supply flows of key green metals.
A recent CSIRO report entitled “Known unknowns: the devil in the details of energy metals demand” points out that:
“It’s become clear that the global transition to clean energy will need a lot of metal. For example, annual demand for battery metals – like lithium and cobalt – is expected to increase by over 450% by 2050.”
“The timing and trade-offs between those different sources of supply is not, however, something traditional forecasts can tell us,” the report explains.
“This is because they rely on things like an assumed supply from recycling, but don’t reconcile this component against scrap availability, which in turn depends upon the ever-changing technology mix in the broader economy.
“Such internally inconsistent forecasts can be misleading – important if you’re planning new mines. Global metal flows are dynamic and complex. Metals can be locked up for decades in durable consumer goods.”
“Under our Current Trends scenario, for example, the opportunity for growth in Co looks to be quite short term, followed by a long period of decline and, ultimately, a glut. For Ni, there is a longer demand window but it is nevertheless quite constrained, while Li has a long and bright future.
The report points out that a major influence on primary demand (mining) is the service life of batteries.
“If most EV batteries go on to serve a second life (e.g. home storage) then these metals might be locked up for an additional decade or more. In this case, mined metal demand may continue nearly unabated.
“However, if the reverse is true – for example, Tesla has no plans for second life – then recycled battery metals might start displacing mining growth within the decade.”
It also warns that “primary demand for lithium, nickel, and cobalt can diverge quite radically depending on the pace of technology change.”
“More rapid evolution of battery chemistries, and shifts in market share, mean that the currently similar bright demand outlooks for these metals could decouple rapidly.”
The report points out that some technologies, like EV batteries, may enter second life applications like home energy storage, underlying material compositions change as technology evolves and the uptake rates of technologies will differ under different policy settings.”
The bottom line is there are traps for players young and old in assuming that rising demand and supply will go on a long time.
The CSIRO report says that unsophisticated models based on current supply levels and basic recycling rates are clouding the real demand/supply picture for both metal mining and recycling.
The report looks at nickel, lithium, copper and cobalt and founds the finding suggest a couple of worrying developments that few people have touched on in the current bullish rush.
For nickel it suggests that while the bald outlook is very strong at the moment, it could soon evolve into one that is worse for primary Ni producers over the longer term.
That’s because a boom in demand and lagging output (which happens in every period of high demand and rising prices because the upturn occurs in periods of supply shortages or deficits) drives nickel prices higher and in turn providing a price incentive for manufacturers to look at rival, cheaper technologies which in turn triggers a slide in demand in demand for the metal, weakening prices and oversupply.
And then there is the so-called ’second life’ for nickel-based batteries which will eventually have a negative impact on overall metal demand and production.
The CSIRO report suggests that 60% of original batteries could end up in the second life process, generating cheaper metal supplies for new batteries and other use.
This second life from the recycling process is not expected to appear immediately – several decades – say by the 2040s onwards but the impact on primary metal producers could be dramatic.
“This is a stark illustration of the importance of the second life issue to primary producers, and the potential stake they could have in encouraging and facilitating it,” the document states.
For nickel, the report found that under the base case scenario where internal combustion engines (ICEVs) continue to totally dominate personal car fleets, in little more than a decade the return flows of secondary Ni begin to supply most of the Ni required for new production.
“Primary Ni settles into a near steady-state at the relatively low (~500,000 tonnes) level, which is sufficient to fill the secondary Ni deficit driven by the growing total demand for vehicles,” the report estimates.
The steady-state establishes itself as more EVs are sold and replace ICEVs in the national car fleet.
Demand for nickel rises quickly and then steadies because of the higher nickel intensity of EVs.
But once the substitution of EVs for ICEV is complete, by 2050 primary demand for nickel will again fall as recycled nickel becomes more available for battery makers to access for their normal levels of production.
That means nickel will face several decades of very sold and rising demand and then a plateau where consumption is driven more (like it has been for use in speciality steels) by regular demand cycles, subject to the economic performance of the wider economy and consumer spending (and incomes).
Cobalt could have an even shorter boom, according to the CSIRO report which fades out in a decade’s time, helped by price driven recycling. In fact the report suggests it is the most vulnerable of the green metals.
Under the current forecast the growing rate of substitution of EVs for ICEVs produces will see growth in cobalt demand by the mid-2020s, to levels several times higher than current total global production.
The CSIRO sees a move towards lower-cobalt formulations for lithium-nickel-manganese-cobalt-oxide (NMC) based batteries (driven by price and technological improvements) and the demand for cobalt slows from 2040 onwards. New formulations could also appear to add to the move away from NMC batteries.
But overall demand for new batteries from EVs and other sources could see the cobalt boom continue into the 2050.
But the CSIRO report warns that effective recycling ends any boom in primary cobalt demand by the early 2030s.
“When the additional demand driven by substitution for ICEVs ends in 2050, the return flows from retiring older, high‑Co batteries quickly drives primary demand negatively,” the report says.
“The rapid change scenario shows how cobalt miners could be misled by the high demand trend early in an accelerated technology shift scenario. Primary demand peaks in under a decade, turning strongly negative in less than two decades.”
According to CSIRO this gloomy outlook is not all that negative – it simply reflects the earlier rapid substitution of EVs in the national vehicle fleet by around 2038.
Again a rapid shift to low-cobalt battery chemistries adds to the downward pressures on demand and metal prices
“Comparing circular economy to current trends shows how central the single variable of second‑life usage ratios could be to the prospects of primary Co producers,” the report points out.
“Rather than current trend’s brief boom followed by decades of decline, under circular economy, the outlook for primary Co demand spans several decades, at three to five times current global demand,” the researchers found.
And then there’s lithium, which the CSIRO says will remain central to most of the main battery chemistries being considered over the long term for use in EVs.
The current trends scenario shows ongoing stable primary demand for the metal over the full period when EVs are substituting for ICEVs.
“Primary demand only goes into serious decline when demand for use in new products peaks, and lagging return flows from end of life (EOFL) vehicles can subsequently begin to catch up,” the report states.
In the rapid change scenario, the accelerated uptake of EVs brings demand for lithium forward, until the substitution is complete by 2038, at which point, secondary lithium supply begins to rapidly catch up with plateauing demand from new products, driving primary lithium demand into a second, prolonged phase of decline, the report suggests.
