The green revolution that is up-ending the automotive and energy industries is proving to be the saviour of the mining sector. The world’s largest mining houses, historically not the friends of the green movement, stand to be among the biggest beneficiaries of the exponential forecast growth in environmentally attractive electric cars and renewable energy sources. Tesla and its rivals require far more metals such as copper and nickel than conventional vehicles, and the volume of metal used in wind turbines and solar panels is vastly higher per unit of energy than coal-fired or gas-fired power. The growth in electric vehicles and batteries is shaping as the next great growth catalyst for the resources sector and explains why the likes of Glencore and BHP are so excited about the energy revolution. The socially conscious owners of Teslas, Priuses and other electric and hybrid vehicles may like to think about how their choice of vehicle is helping to save the environment, but they are also helping save the bottom line of the global mining industry. Glencore, the world’s biggest producer of seaborne thermal coal, is expecting sharp growth in demand over the coming decades for the copper, cobalt, nickel and zinc it mines across the world. Last month, Glencore chief executive Ivan Glasenberg told investors it was clear the growth of electric vehicles was transforming the demand outlook for Glencore’s key minerals. Glencore detailed how it had commissioned consultancy CRU to model the metal needs that would stem from the forecast global growth in electric vehicles, charging stations, grid storage and additional generation and grid infrastructure. The resulting figures were startling: for electric vehicles to represent 30 per cent of car sales by 2030, the world needs another 4.1 million tonnes of copper, or about 18 per cent of world supply last year. There would also be demand for an extra 1.1 million tonnes of nickel, about 56 per cent of 2016 supply, and 314,000 tonnes of cobalt, which is four times more than the all cobalt produced worldwide last year. “The future definitely needs our commodities if we believe these figures on electric vehicles and how the world is transforming,” Mr Glasenberg said. “The world is going to need higher metal prices going forward to incentivise the next generation of new mine projects and projects to be built as fast as possible to feed into this large demand, which we believe is sitting around the corner.” It’s not just mining industry optimists that are looking at massive increases in metal demand. Carmakers themselves have started voicing their concerns about their abilities to source the metals they need to sustain their electric vehicle plans. Luxury vehicle maker BMW recently flagged that its needs for the likes of cobalt and lithium would grow tenfold by 2025 as it develops its expanded fleet of electric vehicles and is looking to lock in long-term supply contracts, and Chinese car giant Great Wall Motors recently signed an offtake agreement with West Australian lithium developer Pilbara Minerals. The electric vehicle growth story is at the centre of BHP’s bullish thesis on copper, given the average electric vehicle contains about four times the copper of a regular mid-sized car. In November, BHP vice-president of marketing minerals Vicky Binns said the company expected electric vehicle penetration to rapidly accelerate from 2025 as batteries become cheaper. The mining giant believes up to 70 per cent of new car sales could be electric by 2035, and up to 100 per cent by 2050, and Britain and France have already announced that the sales of combustion engine cars will be banned by 2040. On top of that, renewable energy should grow from 10 per cent of global power penetration to 30 per cent by 2035 thanks to a build-out of wind and solar capacity. Both wind and solar installations require multiple times the amount of copper and nickel used to generate the same amounts of power in coal and gas-fired power plants. “The extra demand from EVs, renewable energy, and increasing energy efficiency in China in our view cannot be filled by the current list of mining projects, given declining grades across most major operations,” Ms Binns said. “This should drive an increase in the cost curve in the early 2020s, and capital of more than $100 billion is needed to close this supply gap.” Commodity prices and share prices have already taken off in response to the increasingly apparent impact of electric vehicles (BHP, Rio Tinto and Glencore are all trading at or near multi-year highs) and the phenomenon still seems to have a long way to go. HSBC chief economist Paul Bloxham says the shift could be as swift and dramatic as other earlier transitions such as horses to cars and wood to coal. “Although it is still early in this transition, and there is considerable uncertainty about its speed and size, most forecasts suggest demand will either be big or very big,” he said.
AUZ Price at posting:
11.5¢ Sentiment: Buy Disclosure: Held
(20min delay)