The growing demand for EVs (electric vehicles) has led to rising interest in metals involved in their production, notably lithium, nickel and especially copper. According to the International Agency Report in 2020, the world saw a 41% increase in the EV market, which continues into 2021.
Such increase in the demand has automotive giants like Hyundai slashing their combustion engine production in half to make room for their EV output.
EV components contain various metals, such as copper, which amount to over a hundred pounds in battery EVs. With the EV market on a roll, worldwide leaders have decided to act on the opportunity. One recent example involves the Biden administration planning to invest $174 billion in the EV market.
The proposal follows a larger climate change initiative that aims to expand the number of electric charging stations and public transportations (i.e., electric buses). As such, we can expect a subsequent increase in copper demand — a primary material used in EV-related products such as batteries.
China remains the world’s largest EV supplier, controlling 80% of the world’s capacity for raw material refining, accounting for 77% of all battery cells.
ESG’s Role in Driving EVs
ESG (environmental, social and corporate) governance has become a popular movement among countries in recent years. EVs have become a favorite solution amidst ESG discussions, leading to a booming market. With more EVs sold, investors should consider some key trends to anticipate within the commodities market.
For instance, an EV’s battery makes up 20-40% of a car’s cost, with the required materials including lithium, nickel and cobalt. These are some metals that might see a significant rise in mining operations. Now’s a good time to keep a close watch on the market for nickel demand and lithium demand, two core components of EVs.
Palladium is another metal that might see a rise in demand as EV manufacturers advance toward the next generation of lithium batteries (which includes palladium as a component). Market reports show that battery-grade lithium hydroxide has risen by 60% in value (US$12,390) from the beginning of the year to last month.
Copper Price Spike
As the economy begins to recover from the pandemic, the commodities market begins to see some profitable trends. One notable trend involves copper, which saw a record high value in recent weeks. Copper value might steadily rise as countries continue their push for a green economy, fueling the electric vehicle market.
Marko Papic, the chief strategist at alternative investment firm Clocktower Group, compares the copper craze to a space chase, “Everyone is running very fast toward an EV future. Copper is needed everywhere. It conducts electricity,”
Copper saw July contract prices rise to $4.53 a pound, a record value since 2011. The metal has remained a popular choice for decarbonization efforts around the world through EV production. However, due to its pressing demand and depleting inventory, the world might face a copper shortage in the upcoming years.
According to the Bank of America, copper may rise to as much as $20,000 per ton within the next three years. There are many potential gains from investing in companies like Codelco and BHP, the leaders within the copper mining industry.
Codelco recently scored a deal with Microsoft, expanding automation at its mines. The move could see a significant increase in Codelco’s copper production with improved efficiency and reliability. Codelco has proven to be an innovative company in the copper mining industry, recently adopting traceability for its operations, enhancing sustainability efforts.
Time to Act
With the demand for EVs set to uplift metal demand 14 times by 2030, it’s a safe bet to invest in copper mining stocks. We’ve used this quote once and we’ll use it again –
“Any copper junior with a deposit of significant size and grades, will have no problem attracting a major or mid-tier acquirer, that can help finance a future copper mine and bring it to commercial production.”
– KitCo
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