The global electric vehicle adoption rate should be around 10-12.5% by 2025, up from around 2% currently, was the view of an audience of metals industry participants at a seminar hosted by the London Metal Exchange on Monday.
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During a panel looking at the outlook for the global EV business, Jessica Fung, VP at investment firm Pala, agreed with the figure but cautioned that the revolution was at very early stages. However, she stressed that the market is not in danger of getting over-excited as the move, driven by a necessity to reduce carbon emissions, is a "structural trend" rather than "hype".
Denis Sharypin, head of market research at Norilsk Nickel, agreed that the move to electrification is "structural" and will happen.
Global sales of electric vehicles fell for the second straight month in August, with a 9% year-on-year decline led by China and the US, S&P Global Platts Analytics said in its most recent monthly EV Essentials report.
"August's falling global electric vehicle sales are a reminder that technological shifts do not happen smoothly," independent analyst Matthew Turner told S&P Global Platts. "But I do not think it offers too many clues as to the future. The EV market remains small and still heavily dependent on subsidies, meaning sales trends are erratic. Sustained sales growth will come with new model launches, and there are plenty to come in 2020 and 2021."
On the panel Monday, Roberto Browne, equity research analyst at Morgan Stanley, was the most bearish on the rate of adoption. He said there was risk of the market getting "over-excited" and noted that slack global economic conditions could weigh on people's purchasing power.
Still, Norilsk's Sharypin said that using car sales as the main metric might not be the correct methodology for working out true demand.
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He said that raw material demand for cobalt and nickel remained "strong" and pointed to decent manufacturing rates for batteries, and associated offtake agreements.
Nickel is somewhat detached from the rest of the market, having had a stellar year in 2019 as others have faltered on uncertainty created by the ongoing US/China trade spat.
The main factor for the outperformance has been news of one of the world's largest producing nations, Indonesia, halting nickel ore exports in order to create more value in country.
On Monday that was brought forward with immediate effect. The move was meant to come into play at the start of 2020.
Sharypin said that this would lead to a market deficit in 2020, and that "upside risks" were in play for the nickel price. "There is a very bright future" for the nickel market, he said.
Nickel started the year at $10,670/mt and hit a high of $18,850/mt in September. The main ingredients in EV batteries are lithium, cobalt and nickel.
Fung said that going forward, even though nickel's main usage is in the stainless steel industry, there will be a "certain element" of the EV story built into the nickel price.
"Nickel is a very exciting part of the battery story," she said.
This year has been a stinker for the lithium price, which has been on a downward trend since the start of 2019 owing to a perceived glut of supply. However, the jury is out on whether that stockpile is battery grade or lesser quality material. Either way, the story has been bearish and applied price pressure throughout the year.
S&P Global Platts assessed lithium carbonate down $400/mt on the week to $9,500/mt last Friday, while lithium hydroxide fell $200/mt to $11,500/mt.
Morgan Stanley's Browne said that at some point the price will need to track higher in order to incentivize supply as demand grows in the coming years, but he cautioned that a sky-high price would put the brakes on the EV revolution. He pegged around $10,000/mt as a sustainable level. He called for more "rational supply" and for "efficient, low-cost" production.
-- Ben Kilbey, email@example.com
-- Edited by Alisdair Bowles, firstname.lastname@example.org