Of the approximately 207kg of minerals used in typical personal EV electrification system, 32 per cent is graphite, 26 per cent is copper, 19 per cent is nickel, 12 per cent manganese, 6 per cent cobalt and 4 per cent lithium. By contrast, conventional cars use mainly manganese and copper, but in much smaller measures.
Global transportation accounts for just under a third of greenhouse gas emissions, but is also gradually changing to meet decarbonisation targets. An example is the aviation industry. These days a Boeing 787 uses about half the fuel of the legacy 747. In part, this is due to technology supporting lightweight materials like carbon fibre, advanced alloys and aluminium – all creating opportunities in the natural resources universe.
In 1975, the everyday household fridge used around 2200KWh of energy per year. By 1985, this fell to 1700KWh, and had more than halved again by the 1990s to 850KWh. Now our refrigerators tend to use just 500KWh. Rare-earth magnet motors are the reason for this fall, increasing efficiency and using less power than traditional units.
We are seeing this same trend across other forms of energy consumption – heating, airconditioning, audiovisual and automation, as batteries, machines and semiconductors become much more efficient.
Decarbonisation is driving major demand for metals and other resources essential for the transition of energy generation, transport and energy demand towards more renewable and efficient sources. The chart summarises the major underlying demand growth expected in key metals.
Lithium has the highest projected demand. While lithium is somewhat abundant, current extraction and processing capacity is limited, the market is tight and demand is far exceeding supply. The lithium-ion battery is currently the incumbent battery technology, and this will not change any time soon.
While lithium is somewhat abundant, current extraction and processing capacity is limited, the market is tight and demand is far exceeding supply. Picture: EPA/EFE
We see a tight lithium market for at least 12-18 months as new projects and existing resource expansion are needed to meet growing demand.
Graphite can come from two sources – natural, where it is mined and processed; or synthetic, manufactured from oil/carbon sources. Synthetic graphite production is energy-intensive and can be environmentally damaging, but typically produces a more consistent product than natural graphite, which has less impact on the environment.
Right now, energy constraints in China are seeing constraints on synthetic graphite production, which is supportive of natural graphite prices in the near term.
One area we believe is underestimated by the market is the demand for NdPr, a rare earth used in high-strength magnets. Rare earth magnets are used to power energy-efficient motors. Their high magnetic strength means electric motors use less electrical power or energy to produce the same amount of mechanical power. This trend is likely to continue, and we expect to see rare earth magnets increasingly used in everything from EVs to vacuum cleaners and home appliances.
The shift towards renewables and decarbonisation is instigating a dramatic commodity-led response.
We see critical metals as being the primary winners and, unlike many of the boom-bust commodities cycles of the past, these metals may see a more structurally stable demand profile across the cycle, an enormous opportunity for business and investors alike.
James Stewart is a global resources portfolio manager at Ausbil Investment Management.
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