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Momentum surge: backyard electric vehicle boom is only beginning
4:29PM April 5, 2021

Lithium is crucial in limiting the size of batteries. Picture: Bloomberg

My colleague — and mining analyst — Peter Chilton recently sat behind the wheel of a Tesla and was impressed by the car’s performance, to say the least. It’s not a coincidence that I recently drove a different electric car, Hyundai’s Kona, which also goes to show just how independent we are.

Charge it up and we’ll drive it. Heck, we’ll even buy it.

You can shuffle the chairs at AGL Energy all you like, but the future is all about batteries. It’s why we are revisiting a theme that’s hot — the mismatch between supply and demand when it comes to battery inputs.

The last time I covered this theme was just over four months ago in late November and if you invested in the stocks I mentioned then (Pilbara Minerals, Orocobre and Galaxy Resources) you would have made almost 45 per cent on your money, which includes 75 per cent on Pilbara Minerals.

Back then these stocks listed in our backyard had already surged 50-80 per cent, but in my opinion the good news is that this momentum is far from over.

Chilton has been doing analysis on a number of fronts relating to batteries, but before I get into that, let’s look at why lithium is so important in the battery composition in electric vehicles, which consists also of nickel and cobalt.

Lithium is important because it has one of the highest energy densities of any battery technology. It is crucial in limiting a battery’s size. Because the periodic table’s lightest metal is less than 10 per cent of the cost of producing batteries, if its price goes up, batteries will still be economic. Lithium also stands out because of the amount of processing involved in reaching the purity requirement for batteries. These barriers to entry are highly supportive of the lithium price and of existing producers such as those I picked last year.

The primary driver of battery demand is electric cars for which lithium-ion batteries are the enabling technology.

A catalyst for electric vehicles to increase their market share is price parity with internal combustion vehicles, which is forecast to be reached by the mid-2020s. There are segments that should achieve parity earlier (large cars in Europe by 2022) while others later (small cars in India and Japan after 2030).

Factors hastening electric vehicle take-up include new EU emissions targets in 2025, and a range of cheaper electric vehicle models to coincide with this change. Jaguar will go all electric in 2025, Volvo in 2030 with General Motors by 2035.

In 2021, lithium demand for all applications is expected to be about 350,000 tonnes. This is going to skyrocket when you consider that there were close to 2.5 million electric cars sold in 2020. If you then extrapolate from research by the likes of Wood Mackenzie, the demand for lithium is going to climb quickly.

Says Chilton: “In 2021, lithium demand for all applications is expected to be 350,000 tonnes. Assuming global sales of 54 million electric vehicles in 2040, lithium demand solely from electric vehicles in 2040 would be 2.3 million tonnes, implying a minimum seven fold increase in just 20 years. This isn’t including other applications such as grid batteries and commercial vehicles.”

Battery gigafactories, the large-scale producers of lithium-ion batteries, give the electric vehicle transformation proverbial legs. Only 10 years ago there were one or two. A handful emerged in 2017. Today 180 are built or under construction, which will produce 500 gigawatt hours per year. It only goes up from here. Planned production to 2030 by major battery and automotive groups point to a six-fold increase in capacity to about 3000GWh.

The lithium required to fuel this incredible surge in battery production is the equivalent of about 50 Orocobres in 10 years or 120 if you are looking 20 years out.

https://www.theaustralian.com.au/bu...g/news-story/988f8729a31ecc8ba3d3df78aff27f8c