Metals stand to benefit from transport electrification

by: Casper Burgering

Slowly but surely, electric cars are entering our lives. The penetration level of electric cars is growing gradually: rising from 2% of the global vehicle fleet in 2020 to 30% in 2030 according to metals research agency CRU. The accelerating transition to electric cars is also spurring demand for metals. Until now, minor metals – such as lithium, cobalt and vanadium – have been at the center of attention when it comes to the production of electric cars. But now base metals – such as aluminium, copper and nickel – are stepping into the limelight.

Aluminium – for less weight

Having the unique property of being relatively light, aluminium reduces the mass of the vehicle, which is why it is popular among manufacturers of electric vehicles. Research by the International Council of Metals & Mining (ICMM) shows that the use of aluminium rather than traditional steel in car components can reduce the total weight of a car by some 50%. Considering that a 10% decrease in a car’s total weight cuts its energy consumption by 6% to 8%, the potential efficiency gains are huge.

Copper – for conducting electricity

An average conventional car contains 20-25 kilograms of copper, whereas no less than 75-80 kilograms are used in the average electric car. So the growth potential for copper is enormous and the rise of the electric car could cause a supply crunch in this market. But that too is a story for the longer term. According to CRU, demand from electric car manufacturers will only account for about 1.5% of the refined copper consumption this year. And five years from now, it will still probably be no more than 3%.

Nickel – for battery technology

Nickel is currently a key player in the electric car value chain due to its prominent role in battery technology. Nickel is an almost indispensable ingredient in electric car batteries. Nevertheless, car factories will not grow into the main customer for nickel in the coming decade. That role remains the preserve of the stainless steel sector.

Metal markets have thus returned to a growth narrative. In the first years of the millennium, the main protagonist in that narrative was China and its virtually insatiable appetite for metals. China’s share in the demand for base metals soared from an average of 12% in 2000 to 51% in 2017. As China’s economic growth started to weaken, it was initially thought that the growth in demand for metals from China would also gradually slacken. But that picture is now changing.

China has found a new leading role in the metals markets through the sale and production of electric cars. According to the International Energy Agency (IEA), at 1.5%, the penetration level of electric cars in China’s total car fleet is still relatively low, particularly compared to Norway (29%, the highest penetration level in the world) and the Netherlands (6.4%, the second-highest). In absolute terms, however, the production and sales volumes are enormous and are poised for further strong growth in the coming years. This will give the demand for metals an added impulse. This makes the electrification of transport a welcome prospect for metal investors. It’s a bright spot on the horizon, but that horizon is still a very long way away.