Electric vehicles (EVs) are growing in popularity thanks to greater environmental awareness, increasing affordability, and ever-improving infrastructure. Demand from the EV industry for key metals is on a swift upward trajectory and is supported by the recognition that the social, political and economic will behind this transition is real.
Widespread support for EV transition
Many governments have committed to supporting and promoting the production and uptake of EVs in a bid to decrease their countries’ dependency on fossil fuels. China, for example, has a goal of 20% of new car sales being electric by 2025; the UK government has an ambition for at least 50% of new car sales to be ultra-low emission vehicles by 2030; while the US government has pledged $174bn investment in their EV industry in the coming years.
Most automotive manufacturers plan to go completely electric by 2050 and total passenger EV car sales, including hybrid electric vehicles, were up by over 24% last year. According to some experts, EVs will make up over half of all passenger vehicle sales by 2040.
Battery tech is evolving and in every battery there is a complex and varied mix of metals – mainly cobalt, lithium and nickel currently. Most EVs on sale today use fundamentally similar battery architecture: hundreds of individual battery cells packaged into modules or pockets, which together make up the EV battery. There are two main types of battery commonly in use: lithium iron phosphate batteries and nickel-based batteries. Given the scale required to electrify the global automotive and transportation industry, it’s not hard to see why demand for these metals is expected to grow so quickly. Moreover, batteries need to have high energy density, recharge quickly and retain their energy density over many thousands of charging cycles – all the while being transported over roads of every type.
Aluminium, copper, steel, tin, zinc… metals from A to Z
Of course, battery materials are just one part of the EV revolution. Almost every industrial metal you can think of is used by the EV supply chain in some way. Aluminium is widely used by automotive companies for “light-weighting” – that is, reducing the weight of the body and chassis to offset the weight of the battery and increase performance and range.
Copper is essential for wiring and electronics; significantly more copper is required to construct an EV than a conventional internal combustion engine vehicle, with up to a mile of wiring needed! Tin has always been used for solder, but the large amount of electronics in an EV mean that demand for this metal is likely to increase. The development of lighter forms of steel mean that it is increasingly competing with aluminium for use in EV construction in the chassis and the safety frame, due to its strength and durability.
The growth of the EV sector is also intrinsically linked to the expansion of renewable energy generation and energy storage; one cannot grow without the others. Copper is central to renewable energy systems – solar, wind, hydro and thermal – in the generation, storage and distribution of that energy. The development of renewable energy sources, like windfarms, is going to drive demand for steel plate and construction steel.
Current research is focusing on zinc’s potential for use as a battery material for energy storage for charging stations and the deployment of large stationary lead-acid batteries is being investigated to provide resilience and stability to smart grids.
Pricing and hedging
The London Metal Exchange is a vibrant futures and options market that provides price discovery and the opportunity to hedge real risks. Price discovery is one of the most important functions of the LME, and its deep levels of liquidity and close links to industry ensure the LME is the de facto price formation venue for many base metals.
The prices discovered on the LME’s markets are used as the global reference and as the basis for physical trading, as well as in the valuation of portfolios, in commodity indices and for exchange-traded funds. LME contracts offer unique settlement-date structures, designed to meet the needs of the physical market. They reflect the nature and timing of bilaterally negotiated metal trades among the miners and refiners, producers and consumers, buyers and sellers of the metals and battery materials used throughout the EVs production process. It’s certain that the EV revolution is key to a more sustainable future and the LME is here to help drive the transition.
Published June 2021