The global economy will be on the comeback through 2021 and the COVID recovery promises a new wave of investment in green energy technologies like batteries and electric vehicles. Lithium and battery sales volumes are booming while copper prices break through multi-year highs. New data shows that US electric vehicle sales could reach a pace of almost 7 million by 2025, with more than 100 global battery megafactories on deck to begin operation by then. Copper will also be needed in larger amounts for those EVs and some investors believe there are no more stockpiles of scrap out there threatening to derail the orange metal’s ongoing surge.
Related ETFs: Amplify Lithium & Battery Technology ETF (BATT), iPath Series B Bloomberg Copper Subindex Total Return ETN (JJC), Global X Copper Miners ETF (COPX)
EV Sales Projections on the Rise
Sales of electric vehicles (EVs) and plug-in hybrids are expected to rise 28% this year to 2.78 million vehicles, according to consultancy Rho Motion.
Sales of new energy vehicles (NEVs), fully and hybrid electric vehicles, have been especially strong in China, surging 105%, or 160,000 units, In October, marking their fourth consecutive month of gains, according to China Association of Automobile Manufacturers (CAAM) data. That far outpaced overall China auto sales, which saw a 12.5% gain in October.
Beijing has set a target for EV sales to account for half the market in 2035.
In the US, where EVs account for about 2% of the overall vehicle sales mix, the eventual inauguration of President-elect Joe Biden could spur a new wave of innovation and deployment in the industry. Biden has a plan to install 500,000 electric vehicle charging cords by 2030, roughly a five-fold increase in the nation’s EV infrastructure that could cost more than $5 billion. Bloomberg writes that the infrastructure milestone would cover 57% of the charging that U.S. vehicles will need by 2030 and could spark the sale of some 25 million electric cars and trucks.
Per Frost & Sullivan, the US electric vehicles market is expected to reach 6.9 million unit sales by 2025, up from 1.4 million unit sales forecast for 2020, due to government incentives driving EV ownership.
These breakout EV sales and forecasts, have propelled stocks of battery metal producers, as well as copper miners and funds tracking the prices of copper, higher in recent months.
Lithium Producers Leading Battery Metal Breakout
Though lithium prices have declined from 2017, that has cut the cost for batteries and spurred sales volume for the ultra-light metal. As we noted back in August, there are over 100 battery megafactories planned around the world. Bloomberg New Energy Finance notes that manufacturers have announced plans to add 1,769TWh of annual capacity by 2025. In order to keep all those factories powering their growing numbers of electric cars, increasing amounts of lithium, graphite, cobalt, and nickel will be needed. Companies involved in the procurement of those metals will benefit immensely.
SQM, the biggest lithium producer after Albemarle Corp., is moving ahead with plans to more than double their capacity in a bet that accelerating electric-vehicle demand will tighten a currently oversupplied market for the battery metal.
Yahoo Finance writes that Chilean miner is looking past the current lithium supply glut that has pushed down prices. In what BMO Capital Markets calls a volume-over-price strategy, the company wants to grow its market share and capitalize on a recovery when demand growth outpaces supply of the key rechargeable battery ingredient as part of a global energy transformation.
SQM specializes in lithium-brine mining to produce lithium carbonate – the lithium that goes into batteries. Their expansion strategy will increase the supply of carbonate and, therefore, depress prices of lithium spodumene as well, the product of hard-rock lithium mining, dominant in Australia. Spodumene is lower quality than carbonate and goes for a cheaper market rate, but can be converted to lithium carbonate equivalent (LCE) by companies like Tianqi Lithium and Ganfeng Lithium in China.
SQM’s move may be an offensive against spodumene producers who are already struggling with rapidly deteriorating prices. Spodumene miner Altura Mining, for example, was forced to enter receivership at the end of last month…