All trading involves risk. Losses can exceed deposits.

What metals are needed for electric vehicles and battery storage?

Demand for batteries is growing as the world transitions toward electric vehicles and renewable energy. But what metals are needed and what companies are mining them? We speak to John Meyer, partner and mining analyst at SP Angel, about how investors can gain exposure to the space.

All trading involves risk. Losses can exceed deposits.
Tesla
Source: Bloomberg

There is no doubt that battery demand will significantly rise over the coming decades, spurred on by the growth in demand for existing products like electronic devices and smartphones, as well as newer technologies (mainly electric vehicles and energy storage).

This will drive higher demand for a number of metals, which will also accelerate as the cost of developing new batteries declines as time goes on. The speed at which demand for some metals is increasing, twinned with tighter supply, has been very beneficial for commodity prices and many miners are racing to bring more online to meet the forecasted lifts in demand over the coming years.

IGTV's Jeremy Naylor spoke with John Meyer, partner and mining analyst at SP Angel, who outlines how the emergence of electric vehicles, energy storage and other factors will drive demand for certain metals going forward.


Demand for electric vehicles to grow over coming decades

‘We will not stop until every car on the road is electric,’ – Tesla founder and chief executive Elon Musk.

The electric car market will move from early deployment to mass market adoption over the next ten to 20 years. A total of 750,000 new electric vehicles (EVs) were registered worldwide in 2016, when the global stock of EVs surpassed two million for the first time. The US accounted for the largest portion of global EV stock until 2015, when China surpassed it with about a third of the global total.

Some countries have already emerged as leaders in the EV space. Norway had the highest global market share in electric vehicles in 2016, while China was the fastest growing market.

That global stock is forecast to rise to between nine million and 20 million by 2020, up to a ten-fold increase from current levels, and between 40 million and 70 million by 2025, according to the International Energy Agency (IEA).

Electrification to place demand on global electricity networks

The move toward EVs, as well as electrification of other transport, is set to place pressure on electricity generation around the world. However, the IEA believes the additional electricity needed to power the rise in EV demand is ‘sizeable but largely manageable’.

The IEA forecasts EVs and plug-in hybrid electric vehicles (PHEVs) will consume just 1.5% of total electricity demand by 2030, representing growth of just 6% from present levels. This is mainly because of larger lifts in demand for electricity from industry, commercial and residential sectors over the same period.

Transition to renewable energy to spur demand for battery storage

Although renewable energy is generating more of the world’s electricity than ever before, it still only accounts for about 8% of global electricity generation, according to oil major BP. However, renewable sources account for a major chunk of new electricity generation coming online, with around 40% of all new power generation capacity around the world made up of renewable sources such as solar, wind, hydro, geothermal and renewable waste, like biomass.

Renewable energy still suffers from one major downfall over than the likes of gas or nuclear power. Harnessing power generated by the likes of wind or solar has still not been mastered, and unless the power is used as soon as it is generated much of it is currently wasted. This also means renewable energy sources can be intermittent, unable to produce power when the wind isn’t blowing or the sun isn’t shining.

This has spurred on the development of energy storage, with many companies, big and small, creating batteries that will allow renewable energy sources to reach their full potential.

What companies are developing energy storage solutions like batteries?

There are plenty of companies developing energy storage solutions, some as a side activity and some as a core focus, and investors have a choice between big existing players and smaller stocks.

Big players developing energy storage solutions include the likes of Tesla, SunPower, SolarEdge Technologies, Sunrun, E.ON, EDF Energy, Lockheed Martin, National Grid, FirstEnergy and Panasonic.

Smaller players that investors can consider are Redt Energy, Good Energy and Bushveld Minerals.

Electric vehicles and energy storage batteries: what metals are needed?

Copper, already an important metal for numerous industries, is touted as the primary metal to see a jump in demand as a result of higher demand for batteries in the future. The other three metals that will also be key are lithium, nickel and cobalt, with other metals that will be needed including graphite, manganese and vanadium.

Let’s take a look at those four crucial metals, the current supply and demand, where they are produced, and what companies are mining them.

What countries produce the most copper?

Chile has long been the biggest producer of copper in the world, producing more than double than the second biggest producing nation, Peru. However, the amount of copper coming out Chile has declined annually since 2013, according to Statista, while output from Peru has been steadily rising.

Copper chart

The vast majority is consumed by end markets in Asia, where 69% of refined copper ended up in 2016. End markets in Europe consumed 18% of the world’s refined copper that year, followed by North America at 10%, Latin America at 2%, Africa at 1%, with the balance consumed in Oceania.

What companies produce copper?

There are a swathe of big miners that have copper in their portfolio, such as BHP Billiton, Anglo American, Rio Tinto, Glencore, Freeport-McMoRan, Southern Copper, Vedanta Resources, Antofagasta, KAZ Minerals.

Smaller players with copper assets include Anglo Asian Mining, Georgian Mining, Ortac Resources, Strategic Minerals and SolGold.

Currently, the construction industry is the largest consumer of copper in the world, accounting for 44% of total consumption in 2016. Transportation consumed 19% of global refined copper, followed by electric and electronic products at 18%, consumer and general products at 12%, and industrial machinery and equipment at 7%.

What countries produce the most lithium?

Australia has been the largest producer of lithium since 2013, with output climbing annually every year since. Production saw a particular spike in 2016, after surging 30% from the year before. Lithium output in Chile rose by over 17% year by year in 2016, while Argentina has also seen a healthy level of growth over the past four years.

Lithium chart

More: lithium rise to persist as electric vehicles take to the air

There are four main types of deposits that producers source lithium from. The vast majority of global production comes from brine deposits, accounting for 63%, followed by hard rock deposits producing 32% of global lithium in 2016. About 3% comes from soft rock deposits, while 2% comes from geothermal deposits.

Read more: lithium and the new technology

What companies produce lithium?

The larger companies involved in lithium production include SQM, Albemarle, FMC and Lithium Americas.

Smaller producers inclide Orocobre, Galaxy Resources, Neometals, Kodal Minerals, IronRidge Resources, and Bacanora Minerals.

Watch: Bacanora CEO Peter Secker on how Asian demand for battery metals boosts prospects

There is already a substantial demand for lithium in traditional battery markets, used for the likes of smartphones and electronic devices (for example). Batteries consumed 29% of all lithium in 2016, while 27% was used to create glass and ceramics. Industrial greases consumed 12% of global lithium that year, followed by air treatment at 5% and polymer and medical uses each accounting for 4% of global consumption.

What countries produce the most cobalt?

Worldwide cobalt production is currently heavily concentrated in the Democratic Republic (DR) of Congo, which currently produces about ten times more cobalt than any other country. Although cobalt output dipped in DR Congo in 2017, production was still about one million tonnes higher than back in 2013.

There has not been any notable growth in output from any country over recent years, but the likes of the Philippines and Papua New Guinea have only been producing notable levels of the metal since 2016.

Cobalt chart

Cobalt has historically been produced as a by-product by miners rather than a primary material. The metal is often associated with the likes of copper and nickel. Only 2% of global production came from operations primarily mining cobalt, while 38% was produced as a by-product of nickel and 60% as a by-product of copper.

What companies produce cobalt?

Big names in the cobalt space include Glencore and Vale.

There are many smaller players involved in cobalt, including China Molybdenum, Transition Metals, Royal Nickel, First Quantum Minerals, Katanga Mining, Amur Minerals, Regency Mines, African Battery Metals, Aura Energy, Strategic Minerals, Sula Iron & Gold and Alexander Mining.

Lithium-ion batteries is the biggest end market for cobalt at present, responsible for 49% of total consumption in 2016. Manufacturing of super alloys consumed 18%, hard metals 8%, ceramics 6%, catalysts 5%, wear products 4%, rubber additives 4% and magnets 3%.

What countries produce the most nickel?

The Philippines may be the single biggest producer of nickel, but output has been declining in recent years after the government ordered multiple mines to shut down by early 2017 for breaching laws and regulations.

Nickel chart

Nickel is produced from two types of deposits. In 2016, 62% of global nickel production came from laterite deposits with the other 38% coming from sulphide deposits.

Read more: electric vehicle growth is driving nickel prices

Based on the values of imports, China is the single biggest consumer of nickel, having accounted for 23% of global consumption in 2016, followed by the US at 9%. Other major consumers included Japan at 8%, the Netherlands at 6%, Germany at 6%, and the UK at 5%.

What companies produce nickel?

Major miners of nickel include Norlisk Nickel, Vale, BHP Billiton, Anglo American, Eramet, Jinchuan Group, Sherritt International and Sumitomo Metal Mining. Smaller miners include Cadence Minerals, RHI Magnesita and URU Metals.

The primary use for nickel in 2016 was in the creation of stainless and alloy steel products, accounting for 68% of consumption. Other major end markets that year included non-ferrous and super alloy manufacturing consuming 16% of global nickel, followed by electroplating at 9%, casting at 3%, while batteries consumed just 3%.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.