The green revolution brought about by the electric vehicles (EVs) in 2016 has greatly benefited the mining sector. With more than a million EVs filling the streets, the demand for battery components such as copper, nickel, cobalt, and lithium has risen significantly.
Tesla, one of the companies spearheading the EV revolution, has stated that it will require the entire current production of lithium-ion batteries to meet the production target of 500,000 cars in 2018.
With the number of EVs expected to triple in the next two years, according to a Bloomberg report, the mining industry is poised to a boom.
Exciting News for the Mining Sector
A Global EV Outlook 2018 report prepared by the International Energy Agency (IEA) has stated that there could be more than 13 million electric vehicles by the end of this decade.
The Chinese government has resolved to increase EVs to two million by 2020. The EU has also shown commitment for reducing CO2 emissions by 30 percent by the year 2030. The UK and France want to ban sales of internal combustion engines (ICE) by the year 2040. Whether the targets will actually be achieved is another story. But from the current commitments, we can predict that production of EVs will increase significantly in the coming years.
Mining companies stand to benefit from a boom in the EV industry. A research company based in London modeled metal requirements across different points in the EV's supply chain — from charging, storage, and vehicle manufacturing — and found that there will be additional requirements of about 24,000 tons of cobalt, 85,000 tons of nickel, and 390,000 tons of copper due to a rise in the EVs in the years ahead.
Breaking Apart the EV Batteries
A host of materials are used for the manufacture of lithium-ion batteries that are used in most EVs. Let's look at the main minerals that are expected to experience an upsurge in demand due to the rising numbers of EVs.
· Nickle
Contrary to common perception, the primary component of the battery is not lithium, but nickel. Price of nickel had increased at a modest pace of 5.7 percent in February 2018. A World Bank Report has predicted that the price of this mineral will increase from about $10,559 at the moment to nearly $18,000 over the next decade.
Not all nickel, however, is suitable for the manufacture of EV batteries. Only nickel mined from limonite and sulfide deposits, which accounted for about 49 percent of nickel supply in 2017, is suitable for EV batteries. The latter is the preferred option as it's generally less costly to mine nickel from sulfide deposits.
Existing nickel sulfide deposits can sufficiently meet the rising demand of nickel for EV batteries at the present. However, discovery of new sulfide deposits is rare. So, it's difficult to say whether the demand for this mineral can actually be met cost-effectively in the coming decades.
· Graphite
Another main component of EV battery is graphite. The CEO of Tesla, Elon Musk, had stated in 2016 that their batteries should be called Nickel-Graphite since it primarily consists of graphite at the anode side and nickel at the cathode side.
The price of graphite had also increased due to a surge in demand for EVs. Graphite prices had increased by about 36 percent during the second half of 2017.
· Cobalt and Lithium
To meet the rising demand for vehicle batteries, the demand of cobalt and lithium is also expected to increase tenfold. Prices of cobalt and lithium have increased remarkably in the past few years. Cobalt prices had gone ballistic last year, increasing by 129 percent. Similarly, lithium prices had increased by a remarkable 114 percent the same year.
Orocobre Ltd. that is one of the lithium mining companies has recently reported an increase in revenues. The reported net income increased by about 11 percent in December year, and the profits are expected to increase further with the proliferation of EVs in the market.
Demand for Minerals Among EV Manufacturers
Batteries used in EVs manufactured by Nissan and Chevrolet are made up of manganese, cobalt, and nickel. The cathode of the battery is generally made up of 20 percent cobalt and 60 percent nickel. There are also manufacturers that use EV batteries that contain 10 percent cobalt and 85 percent nickel.
However, most manufacturers today are working towards manufacturing the latter model batteries since higher nickel content extends the vehicle range and energy density.
Due to most manufacturers now favoring EV batteries with high nickel content, it's expected that the demand for this mineral will increase in the coming years. That said, despite being the main component in EV batteries, nickel is primarily used today in stainless steel production. The situation is complicated by the fact that not all types of nickel deposits are suitable for electric car batteries, as mentioned earlier. As a result, the net demand and prices of this mineral will remain volatile.
Conclusion
EVs are expected to be an $87 billion market in the next decade. This is an industry that will make an increasing impact on the mining sector in the years ahead. Already the increasing demand for EVs had resulted in an upsurge in prices of many minerals including aluminum, cobalt, graphite, lithium, and nickel.
Apart from EV battery components, the components of electric vehicles such as copper could also experience increased demand. A typical internal combustion engine vehicle uses about 20 kilos of copper. On the other hand, EVs use four times this amount — about 80 kilos of copper.
Increasing number of EVs on the road could shake the industry in another way as well. It could result in a daily reduction of about 21 billion barrels of oils. This could result in a negative hit on the gasoline prices.