Electric vehicles may play role in post-COVID-19 revival and battery metal producers should be ready

The COVID-19 pandemic has brought economies to a standstill and the resulting reduction in carbon dioxide emissions could push clean technologies like electric vehicles (EVs) to the forefront. This is likely to present opportunities for battery metals producers and those that are developing projects. Since the outbreak, NASA satellite data has shown a 30% drop in air pollution over the Northeast US, 25% over mainland China and in excess of 40-50% across some cities in India and Europe as travel and transport has dropped dramatically. The International Energy Agency (IEA) and the World Bank Group both concur that the fall in CO2 emissions is likely to rebound as the world economy recovers. Following the 2008-2009 recession, carbon emissions soared by a record 6% in one year, in part because many of the investment programs that were meant to stimulate the economy went to carbon-intensive industries. EV economic revival IEA executive director Dr Fatih Birol said that the pandemic represented an opportunity for governments to use the current situation to step up their climate ambitions and launch sustainable stimulus packages focused on clean energy technologies. He said: “The coronavirus crisis is already doing significant damage around the world. “Rather than compounding the tragedy by allowing it to hinder clean energy transitions, we need to seize the opportunity to help accelerate them. “This is an inter-generational opportunity, where smart economic planning can enable us to put the world on track to meet our climate commitments, including the Paris Agreement. “We need to make the key pillars of energy transitions – such as energy efficiency, renewables and battery storage – top priorities for creating jobs, improving critical infrastructure and driving innovation.” World Bank Vice President for Infrastructure Makhtar Diop said there was an opportunity for the electric vehicle market to be a part of the economic revival. He said: “Boosting low-carbon transport will not only benefit the climate but also support long-term economic growth, create quality jobs and connect more people to opportunity.” Near-term outlook In the near-term, Wood Mackenzie reports that global electric vehicle sales will drop 43% this year due to the virus. Principal analyst Ram Chandrasekaran noted that the uncertainty and fear created by the outbreak had also made consumers less inclined to adopt new technology. “Once the epidemic is contained in China, we suspect consumers will flock back to car dealers and reaffirm their confidence in EVs.” Demand is expected to bounce back towards the end of the year post lockdown but many new EV model launches have been pushed back. Chandrasekaran said: “Ford introduced its Mustang Mach E in November 2019, but it won’t be widely available until H1 2021. “General Motors celebrated an ‘EV Day’ on March 4 to tout its readiness for the transition to electric vehicles, however, none of its new products is going to be available until late 2021. “Volkswagen has been promoting the ID.3 for several years but isn’t expected to starting selling the model until later this year.” Volkswagen has already resumed production at its plant in Zwickau, Germany, with 50 of the ID.3 to be produced per day at reduced speed – around one-third of the production volume prior to the pandemic - and has resumed production at almost all its plants in China. In the long run Bloomberg New Energy Finance’s annual forecast for electric vehicles looks further into the future, expecting annual passenger EV sales to rise to 10 million in 2025, 28 million in 2030 and 56 million by 2040. By 2040 it expects around 500 million passenger EVs and over 40 million commercial EVs to be on the road. In terms of market share, around 56% of light commercial vehicle sales and 31% of medium commercial vehicles in China, the US and Europe will be electric. It's anticipated that Europe will pull ahead of the US as the number two EV market in the 2020s, driven by tightening fuel economy regulations and growing commitments from domestic automakers. Japan, South Korea, and Australia all see significant adoption of EVs by 2040 with EVs representing 63%, 52%, and 61% of passenger vehicle sales respectively. But China dominates the sector and is expected to account for 48% of the passenger EV sales market in 2025, 34% in 2030 and 26% in 2040. Supply chains and battery metal demand Benchmark Mineral Intelligence anticipates that China will be in the EV driving seat coming out of the coronavirus pandemic. The country dominates the chemical production of battery-grade raw materials, at 80% of total global production and around 73% of lithium-ion battery cell manufacturing. However, only 23% of global supply of all battery raw materials comes from China, which presents an opportunity for producers. A new World Bank Group report 'Minerals for Climate Action: The Mineral Intensity of the Clean Energy Transition’ has estimated that the production of minerals, such as graphite, lithium and cobalt, could increase by nearly 500% by 2050, to meet the growing demand for clean energy technologies. Bloomberg anticipates that the annual lithium-ion battery demand for EVs will pass 1,748-gigawatt hours annually by 2030. So where does this place producers? Soon-to-be producers, like Lake Resources NL (ASX:LKE), are poised to take advantage of increased demand post-COVID-19. Most forecasts estimate a lithium undersupply in around 2023, possibly 2025, and the company anticipates being in production around that time, just as demand for lithium and electric vehicle growth booms. Managing director Steve Promnitz said the pandemic had served as a reminder that 68-75% of all batteries came out of China and people were becoming quite interested in those supply chains. He said: “This [demand] has also been driven by the rapid increase in mega factories of lithium-ion batteries. “There's 123 planned - and they have to be fed with something.” The company’s location in Argentina's lithium triangle makes it well-placed and well-timed to enter production to become a lithium supplier to the US or to Europe. Shift towards sustainability Then there’s the added advantage of a sustainable production process for producing high-purity lithium. Lake’s unique extraction method, developed by Lilac Solutions, removes lithium directly from the salty water from the brine and is more efficient, faster and results in higher recoveries. Promnitz said: “It can very quickly and efficiently produce a premium product in days - not in months or years. “An additional benefit of our process is that it's sustainable, which wasn't really a thing in the past, but the tier one battery and tier-one car makers are clearly looking for a sustainable product in their supply chain. “Despite COVID-19 being an awful thing that's affected the world, at least it has sort of refocused the world to looking at the benefits of perhaps a cleaner and more battery-driven electric mobile future.”