Post-Covid-19 EV growth to bolster copper, cobalt demand
The Covid-19 outbreak is poised to strengthen the electric vehicle (EV) momentum, as well as the markets for cobalt and copper, says Eurasian Resources Group (ERG) CEO Benedikt Sobotka.
He notes that the drive towards EVs has been relentless over the past few years, with tens of billions of dollars committed to the electrification of new model offerings.
Automakers have faced two major hurdles, mainly, the irregular and often opaque implementation of government subsidies; and, secondly, the question of how to transform traditional supply chains without facing challenges from politicians and unions, he indicates.
While clarity around incentives may not yet be achieved, governments appear eager to continue to promote the electrification of transportation, he says, highlighting efforts in China and the European Union.
“For governments, it may make sense to use a crisis of these proportions to speed up a change which is already viewed as inevitable.”
Sobotka avers that for automakers, the Covid-19 lockdowns offer a rare opportunity to take a step back and re-evaluate long-term strategies.
“Although these are distressing times, it is also a chance to restructure supply chains and take more decisive steps towards embracing EVs.
"There is a growing appetite for EVs and EV penetration rates are rising across many countries, with the UK having reached a penetration rate of 7% in March, Germany setting a new record at 9% and France reaching a plug-in EV penetration rate of 12%. The same pattern is evident in many other countries," he notes.
Sobotka says EVs are weathering the Covid-19 storm better than internal combustion engine vehicles, and that governments and automakers should have noticed this too.
He posits that lithium-ion battery demand stands to benefit and that cobalt – as an integral part of these batteries – will be in high demand in coming years.
This sentiment is reflected in cobalt prices which, as of April 20, continue to trade slightly higher than at the beginning of the year, unlike many other metals which have seen double-digit price drops over the same period, he notes.
Meanwhile, after a sharp fall in the second half of March, copper prices are back on an upward trend, trading above the $5 000/t mark, mainly owed to supply disruptions, says Sobotka.
“While there is little doubt in our minds that the demand side of the market will be heavily reduced this year, the recent swathe of mine disruptions is quickly catching up; so fast in fact, that it is increasingly likely to counteract the losses on the demand side.”