The Energy Transition and the Role of Metals
The demand is increasing for battery metals (e.g., copper, cobalt, lithium, nickel).
Firms are building new plants in the U.S. and legislation is focused on ensuring that a significant percentage of the materials used for EV batteries are American made.
Companies like Redwood Materials (a recycling firm) are ramping up investments and activities. By 2025, they may deliver materials equivalent to 100 GWHs in batteries, comparable to a major battery producers.
Demand Growth by Metal and Application
Source: WisdomTree
Battery Recycling in Focus
The geopolitics of 2022 are demanding that manufacturers at least appear to be planning for growth in their domestic capacity.
90% of the semiconductors/chips are currently produced in Taiwan, too close to China for Western governments.
WisdomTree sees opportunity all the way along the battery value chain but especially in material mining and battery recycling.
The Profit Opportunities in Battery Metals
Source: Wood Mackenzie, WisdomTree
Electric vehicles sales only recently ramped up so it will be another 8-10 years before a meaningful number of batteries are in need of recycling.
Chris anticipates that by 2030 the scale will be there, with the first generation of EVs heading for the scrapyard and in need of recycling.
Chemistries and innovational change will occur as batteries chances – it will be the major players that are able to get the contracts and scale up the operations.
Mining is one partial solution to solving the battery supply chain problems we currently face, however recycling could end up being just as important.
Today most of the recycling companies are private.
Public markets aren’t very kind to money losing businesses with high capital needs.
However, exciting things are happening under the surface with venture capitalists involved to get company infrastructure/operations on a firm footing.
Chris believes there will ultimately be significant profit potential for recyclers once they are able to scale and have a reliable supply of battery metals to work with.
When Will Gas Vehicles Go Extinct?
Chris cautioned us that anyone making 18 year forecasts will be wrong, including himself, though there are always lessons to be learned from the excercise itself.
The forecast below shows that EV sales growth is rapid but still at the early stages.
Back in 2012 there were approximately 120,000 electric vehicle sales that year.
By 2022, about 120,000 electric vehicles are sold each week.
Still EV’s are less than 7% of US sales and far fewer when the rest of the world is included
Companies like GM are coming out and saying that they’re not going to sell internal combustion engine cars by 2030.
For the Biden Administration’s net zero carbon ambitions to be realized by 2050, by 2035 sales need to be higher than current figures, nearly double.
The longer term growth of electric vehicles will require much larger supplies of battery metals than the world can provide today.
Without reliable supply, battery cost escalation and shortages will hold back the consumer transition from fossil fuels to electric.
On the here and now wait times for EV’s, caused by COVID supply chain bottlenecks, certainly aren’t helping demand growth.
Luckily Chris is seeing wait times for EVs finally starting to improve.
The price of fuel is also a major factor in adoption and higher energy prices will help drive EV sales.
The best case scenario for electric vehicle demand is continued oil shortages believe it or not.
Source: Wood Mackenzie
If you would like to read more about the differentiated research being done by Chris and the team at Wisdomtree, please visit this LINK.
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