Different EV Battery Chemistries May Employ Other Metal Minerals Such As Nickel
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Supplying the renewable energy revolution
The global economy is in the early stages of the renewable energy revolution. The annual investment required to fuel this revolution is forecast to be US$1.4 trillion in 2022, rising to US$4.5 trillion by 2030 to achieve the 2050 net zero commitment.While many of the technologies are new, the materials required to build them are not. Copper, lithium, and nickel are some of the commodities required to build the renewable energy infrastructure the global economy requires in its transition to a low carbon future.
We believe Latin America is well placed to take advantage of the opportunities created by this transition with 54% of global lithium reserves. The region is also a leading producer of copper, and iron ore. Electric vehicle (EV) batteries and battery energy storage systems (BESS) require these commodities in large volumes and Latin America has the mines to supply them.
Copper
Chile is the world’s largest copper producer, accounting for 26% of supply in 2021. Looking ahead to 2035, Chilean copper output is forecast to increase by 57%, maintaining its global share of production. Peru is forecast to witness the fastest growth, with output from a lower base doubling over the same period. Mexico is also a significant copper miner and benefits from its proximity to the US market as well as its large auto manufacturing base.
Copper is the biggest structural growth story in the renewable energy revolution. Copper wires are required for the upgrade and new power transmission lines to transmit electricity generated from new solar, wind, and other renewable sources to homes and industry. Copper is also a critical material used in EVs. On average, EVs require more than double the amount of copper compared to a traditional internal combustion engine (ICE) vehicle.
Grupo Mexico
Grupo Mexico’s activities include mining, exploration, freight railroad service and infrastructure. Its mining division is primarily focused on copper via its US-listed subsidiary Southern Copper. The firm’s focus of business is in Mexico, Peru, and the US.
China has been a key driver of copper demand in the past, accounting for 58%8 of total global consumption in 2020. As China’s economy matures, its share of consumption is forecast to fall to 43% by 2050.8 Despite this slowdown, global copper demand is forecast to continue rising8 . Future demand will be driven by the need to expand and upgrade transmission networks, EVs and the infrastructure required to support them, and Battery Energy Storage Systems (BESS) to balance the differing demand supply requirements of homes and industry.
S&P Global forecasts the demand for copper will double to 50 million metric tonnes (mmt) by 2023 relative to 2025, compared to forecast supply of 40 mmt in its base case and 48 mmt in its optimistic case. This imbalance is based on current and planned investments. This may change as the deficit encourages producers to increase investments as well as encouraging increased recycling and recovery of used copper.
Lithium
Lithium is a critical mineral used in the batteries for EVs. Different EV battery chemistries may employ other metal minerals such as nickel, cobalt, manganese or aluminium, but lithium is core. The differing chemical make up determine the power, capacity, charging speed and overall cost of the battery. As well as batteries, lithium is also used in the production of pharmaceuticals and industrial products. Lithium carbonate can be found in glass, aluminium and ceramics. Lithium hydroxide is primarily used in batteries for EVs.
A McKinsey study in 2022 highlighted 17% compound annual growth rate (CAGR) in demand for lithium between 2015 – 2020. However, global lithium demand is forecast to soar by 300% by 2030 with lithium’s use in batteries increasing from 30% in 2015 to 95% of by 2030, driving the growth. This is having a predictable impact on the price. Lithium hydroxide has risen from a five-year average of US$14,500 to US$65,000 per metric tonne in March 2022.
Latin America has the world’s largest lithium reserves, accounting for 54%8 of the total, with Chile standing out as holding the largest reserves. Sociedad Quimica y Minera de Chile SA (SQM) is the world’s fourth largest lithium producer and the largest focusing on using low carbon (solar) to produce lithium from brine lakes in Chile. Albemarle—the world’s largest lithium producer—also has significant lithium brine operations in Chile, and relies on hard rock mines in Australia and the US
Iron ore
Brazil is the world’s third largest iron ore producer, with Vale, the world’s largest miner and exporter of the commodity, producing 31510 mmt in 2021. Fitch forecast global iron ore supply to peak at 3.5 billion mt by 2025, with output in Brazil rising to 542 mmt over the same period.
Steel is often an overlooked commodity in the renewable energy revolution. While it does not have the superior conductivity of copper, it remains a crucial input to EVs and the infrastructure required to upgrade power networks and build the charging stations, and BESS. Although a medium duty battery EV (BEV) has an average of 139 kilogrammes of copper in its motor,wiring harness and battery pack, it requires 660 kilogrammes of steel. This is mostly in the body frame, but the battery pack contains up to 60 kilogrammes of steel.
The world’s biggest consumers of iron ore are in emerging markets, including China and India, which present physical challenges for Brazil as its exports have to cover considerable distance to reach this market. While low-cost production gives it a cost advantage over rival producers, this advantage is eroded by the cost of transporting the product to market in Asia. It also increases the carbon footprint of Brazilian iron ore compared to Australian suppliers. This is an issue that will increase in importance as investors increase the focus of the carbon intensity of their portfolios.
