In a few decades, highways will largely be full of cars streaking along with little noise, powered by electric motors. This much is agreed by those in the industry, even with electric vehicle (EV) sales just creeping up currently with the majority of sales in China.
BloombergNEF forecasts that passenger EV sales will climb to 8.5m in 2025, up from 1.7m this year, before skyrocketing to 54m in 2040. Sales in 2040 would be 58 per cent of total vehicles sold.
To make this EV-filled world possible, supply of battery minerals has to increase. The World Bank updated its 'Minerals for Climate Action' report this week and said demand for lithium, cobalt and graphite could climb by 450-500 per cent by 2050 in a scenario where global warming is limited to 2 degrees. But while there are sweeping forecasts for how transport will be in 30 years, the next few years are uncertain.
BloombergNEF sees EV sales falling this year because of Covid-19, although the drop of 18 per cent is less than that seen in internal combustion engine (ICE) car sales, which are forecast to fall 23 per cent.
And while lithium, graphite and cobalt demand might be through the roof in a few decades, prices have been weak for two years. Miners have already seen one boom-and-bust energy minerals scenario, with lithium operations put on care and maintenance in Australia and developers listed in London trading at a fraction of their peak valuations between 2016 and 2018.
On top of the limited supply chain investment prospects at the moment, there is the risk posed to EV makers by the hostility between China and the US. China has the battery know-how and dominates graphite and rare earth mining and lithium processing, while carmakers are lining up to build EV factories there.
The miners most exposed to battery minerals currently are largely listed in the US, China and Australia, while London developers such as Savannah Resources (SAV) and Bacanora Lithium (BCN) are still battling towards production. Glencore (GLEN) is the most important producer of cobalt, but in mid-2019 the miner took a $350m writedown on 10,000 tonnes of cobalt held by its marketing division, although its reduction of supply from last year should support prices.