The Federal Government’s March Resources and Energy update has provided a handy rule of thumb for investors looking at electric vehicles as well as the usage and demand for renewable minerals.
The quarterly points out that “Surging electric vehicle (EV) sales in the major nations have implications for a range of critical minerals and metals in the outlook period (which is to 2026-27).
“In addition to using about 9 kilograms of lithium, the average light EV requires around 200 kilograms of other key minerals and metals”.
That’s about 6 times the volume used in a car with an internal combustion engine (ICE). It’s biggest (and most expensive) commodity cost isn’t the steel, aluminium and other metals it is made from, but rather the litres and litres of petrol or diesel it will consume in its lifetime.
That helps explain why EVs are increasingly attractive propositions post the Ukraine invasion. Besides the obvious decarbonisation benefits, there’s the hip pocket benefit that eliminates bowser shock that ICE vehicle owners are presently ‘enjoying’ (not).
And as we get used to the idea and understand the interplay between EVs, electricity and its use in the home and business, the cost of living will actually be easier to control so far as critical inputs like heat, energy at home, transport, food/eating, rest and lifestyle.
Which is why the outlook for key renewable metals remains so positive – it is going to be an all-encompassing change in the way we live – but it will take time.
“The production of electric vehicles and new energy technologies will see growing demand for commodities such as copper, aluminium, lithium and nickel.
But there is a trap in the current boom for carbon-based energy sources like coal and oil.
“The volume of energy exports is forecast to show only minor growth during the outlook period. Record high prices will impact adversely on near-term demand,” the Quarterly forecast.
So while the value of key energy exports will rise (in fact have already jumped), that increase will end up self-defeating (as they always are) with consumption falling as demand is slowed by monetary policy tightenings around the world to control inflation and impacting overall demand in economies larger and small.
That will help boost the growth of less costly alternatives, of which the leading choice will be renewables like solar, wind and lithium (and the other metals) in EVs, ETs (electric trucks), and EBs (electric businesses).
But amid all the bullishness about the future of renewables, the Quarterly sounded a note of caution.
”…the recent surge in EV sales has created some of its own pressure. The cost per kilowatt-hour (kWh) of battery packs is expected to rise in 2022, off the back of surging battery metal prices.
“Lithium hydroxide prices more than doubled in 2021, while nickel is facing its own price pressures following the Russian invasion of Ukraine. It is expected that price parity of EVs will occur when battery costs reach US$100 per kWh.
“If the prices of battery metals remain elevated, this would push the ‘tipping point’ for EV adoption later, creating some softening for nickel in battery demand. Alternative battery chemistries that do not use nickel are also emerging.
“Total supply from mine and brine operations is currently unable to meet demand. While project development is underway, it will take time to close the supply gap.
“Stockpile size is difficult to determine, with some estimates of 4–8 weeks for spodumene.
“With such tight supply conditions, and given delays associated with shipping times and ongoing supply chain challenges, it is unsurprising that some lithium processors and battery manufacturers are currently securing supplies at record high prices.
The current rapid rise in lithium prices at all levels also contains a warning for companies in the sector – the higher the price goes, the more battery makers and their car company customers and others will search for cheaper alternatives with similar battery densities.
There are already alternatives being proposed for rare earths currently used in EVs and especially batteries.
Reuters reported this week on a UK company called Advanced Electric Machines (AEM) in northern England, which is working with Volkswagen’s luxury brand Bentley and other companies to develop recyclable electric motors free of rare earth metals, which are often produced using polluting chemicals.
“Our customers need ways to ditch internal combustion engines that are cost-effective and sustainable without putting tons of this nasty rare earth stuff into their cars,” CEO James Widmer said.
Reuters reported that AEM has developed a recyclable motor for EVs using electrical steel and aluminium instead of copper and magnets, thus removing rare earth metals.
Mr Widmer said AEM’s motors would be cheaper than conventional ones and in carmakers’ tests have been up to 15% more efficient.
Start up, Britishvolt (with Glencore as a big shareholder and partner), is building an EV battery plant that will run only using renewable energy.
Peter Rolton, Britishvolt’s executive chairman, said national governments would need alternatives to fuel taxes that raise vast sums, and taxing carbon would help to squeeze it out of supply chains.
“Carbon taxation is an inevitable part of a 2050 net-zero vision,” he told Reuters. “You can see that one coming.”
That is definitely one to keep an eye on just when the likes of Lynas and Iluka are spending billions of dollars on new rare earths processing and refining (as well as mining) operations here and in China and the US.
