The switch to electric vehicles over the coming years may end up emulating what occurred with smartphones in the mid-2000’s.
Back in 2007, with the release of the first iPhone, smartphone ownership was less than 10% of the market (remember the Blackberry?). It grew gradually, but steadily, over the following years as Early Adopters embraced the technology.
After three years, smartphone infiltration was at 25%. Then something remarkable happened. The majority got on board with the technology and the share of the market rose nearly exponentially to 75% over the next five years.
This was beyond the expectations of analysts, investors and end users.
Move forward to today and replace smartphones with electric vehicles. The early ‘Innovators’ tail has been longer (remember the first Prius?), however many commentators are starting to call the shift from the Early Adopters to the Early Majority. For smartphones, this saw market share rise from 15% to 50% very rapidly.
It is pretty obvious from day-to-day observations that EVs are becoming more prevalent on the road and in advertising. Very few carmakers are pushing internal combustion engine vehicles, with all of the sales push into EVs and hybrids.
For battery minerals, this big move into EVs is likely to result in big demand requirements. According to an analysis by Wood Mackenzie, the average electric vehicle requires 66.3kg of graphite, 13.3kg of cobalt, 8.9kg of lithium and 2.3kg of rare earths.
Overlay these requirements per vehicle over the forecast demand curve for electric vehicles and you see truly massive numbers for critical minerals.
Over the period 2020-2040, Wood Mackenzie forecasts an increase in lithium demand from batteries to increase by 940%. That’s nearly a ten times increase!
For graphite, the picture is even starker, with 1100% increase over the same period. Benchmark Mineral Intelligence forecasts that there needs to be at least 97 large scale graphite developments by 2035 in order to meet demand. Read differently, it means that the market is well and truly large enough to accommodate all new entrants.
Cobalt demand is an interesting one, however with a different geopolitical complexion. Wood Mackenzie’s analysis indicates an increase in demand of 170% from 2020-2025, but ‘only’ increasing to 270% over the whole period from 2020-2040. The major challenge for cobalt is the majority (by a long, long way) is produced in the Democratic Republic of Congo (DRC), a country with questionable environmental, social and governance (ESG) issues.
If battery and car makers implement stricter ESG requirements, a cobalt shortfall could occur as early as 2024.
For rare earths such as neodymium, praseodymium and dysprosium, the demand curve looks positive, with 233% increase for the period 2020-2050. Whether this results in a surplus or deficit will be dependent on the time required to bring new non-Chinese supply online.
At a Benchmark Mineral Intelligence conference a few years back, a quote from one of the analysts keeps coming back to mind when he said, ‘no one can realistically visualise an exponential curve’. The shift in sentiment occurs so quickly that it catches everyone by surprise.
Think that I’m wrong? Consider the surge in support for the Matildas over the past two months…..
White Noise communications is provided a fee for service working with companies which may have exposure to commodities or securities mentioned in these articles. All articles are the opinion of the author and are not endorsed by, or written in collaboration with, our clients.
Photo by Jonas Leupe
