Rising electrification in America’s auto industry is likely to boost the prices of key metals needed to make the electric and battery-powered transformation a reality. Copper and lithium are already some of the hottest commodities on the market these days, but several catalysts for surging demand are visible throughout the the next decade.
When it comes to the supply side, though, each of those metals face potential shortfalls if they cannot adequately ramp up output. The supply of copper is already expected to fall into a global deficit this year, while producers in the lithium market look like they may be initiating a wave of consolidation to improve their scaling and profitability.
Related ETFs: Amplify Lithium & Battery Technology ETF (BATT), iPath Series B Bloomberg Copper Subindex Total Return ETN (JJC), Global X Copper Miners ETF (COPX)
Strong US EV Market Spurs Demand for Key Metals
The electric vehicle (EV) market in the US may be set to spin into overdrive.
Last month, President Biden proposed spending $174 billion to promote EVs and install 500,000 charging stations across the US as part of a sweeping infrastructure announcement, a plan MRP highlighted months prior to this official announcement. Bloomberg writes that the charging infrastructure would cover 57% of the charging that US vehicles will need by 2030 and could spark the sale of some 25 million electric cars and trucks.
$100 billion of that spending will go toward consumer rebates. That program would replace the $7,500 rebates General Motors and Tesla Inc. no longer qualify for after they sold more than 200,000 zero-emission models. Per Reuters, the plan lays out $20 billion for electric school buses, $25 billion for zero emission transit vehicles and $14 billion in other tax incentives.
New data from Cox Automotive and Kelley Blue Book found sales of battery-powered EVs grew 44.8% YoY during the first quarter of 2021, with 98,832 units sold, as compared to 68,247 electric vehicles sold in the first quarter of the 2020 calendar year. Tesla was the dominant electric vehicle brand in Q1 2021, with 69,300 vehicles sold, or 71% of total EV sales in the U.S. during the time period.
These trends bode especially well for metals that are critical in the production of electrification and battery technologies. In particular, copper and lithium.
Copper – “The New Oil”?
Copper stockpiles in LME-approved warehouses recently hit their highest since November at 172,025 tonnes, but that hasn’t stopped the ongoing rally in copper futures from touching a 2-month high this week at $4.245/lb – up more than 80% from a year ago.
In a new Goldman Sachs report, published Tuesday, the investment bank referred to copper as “the new oil”, also noting that the market is facing a supply crunch that could boost the price by more than 65% in four years. By 2025, global demand for copper is expected to soar to nearly $15,000 per tonne, up from current prices of around $9,000 per tonne, per the bank’s estimates.
Due to mass adoption of green technologies like batteries and electrification, demand would significantly increase by up to 900% to 8.7 million tons by 2030, the bank estimates. Should this process be slower, demand will still surge to 5.4 million tons, or by almost 600%. By the start of the next decade…