June 2023
Let’s set the scene, shall we?
The electric vehicle (EV) market is poised for exponential growth as the world moves towards cleaner energy solutions.
Industry experts predict a tenfold increase in the EV market by 2025 and an astounding fiftyfold surge by 2030.
This unprecedented expansion will generate massive demand for battery metals, including lithium, cobalt, nickel, graphite, and manganese. For investors, this boom represents a compelling opportunity to capitalise on the rapidly growing EV sector.
Analysts foresee substantial expansion in the EV market, driven primarily by countries such as China and Europe, which are at the forefront of EV adoption.
If governments continue implementing robust policies that support the transition to EVs, the International Energy Agency (IEA) estimates that there could be more than 300 million electric vehicles on the roads worldwide by 2030.
And it’s not just the government making the push — although the government is the leading catalyst that can make it all possible, and rather rapidly at that.
After all, governments worldwide are implementing various incentives and policies to encourage the adoption of electric vehicles. These measures include tax breaks, subsidies, and other financial incentives that are reducing the purchase price of EVs.
Such governmental support is instrumental in driving consumer adoption and accelerating market growth.
But there are actually a few key factors driving the growth of the EV market.
For one, there’s the surge in demand. Increasing numbers of environmentally conscious consumers are embracing greener transportation options, leading to a surge in demand for electric vehicles.
As awareness of climate change and air pollution grows, more individuals are opting for EVs as a sustainable alternative.
Then there are the falling costs. Technological advancements in battery production and improvements in electric vehicle manufacturing processes have resulted in reduced production costs.
This cost reduction makes EVs and their batteries more affordable, thereby expanding their market appeal to a wider range of buyers.
Sound good so far?
Let’s see what else we can learn about this rapidly growing industry.
Capitalising on the battery metals boom: Time for strategy
With the EV and battery metals industry growing so fast (and backed by so much support), it’s only natural it’s getting plenty of interest from those looking for market opportunities.
This is why investors looking to capitalise on the battery metals boom should consider their strategies. Such an opportunity as this needs to be played the right way, and a solid understanding of these types of investments can really be worth its salt.
But how to do it? Let’s consider the following list of strategies:
- Diversified Investments: Instead of focusing solely on a single battery metal, investors can diversify their portfolio across multiple metals, including lithium, cobalt, nickel, graphite, and manganese. This approach helps mitigate risks and ensures exposure to the overall growth of the battery metals market.
- Mining Companies: Investing in mining companies that specialise in battery metals production can provide direct exposure to the market’s expansion. Careful analysis of a company’s financials, resource reserves, operational efficiency, and sustainability practices is essential for making informed investment decisions.
- Exchange-Traded Funds (ETFs): ETFs focused on battery metals offer a more diversified approach to investing in the sector. These funds typically hold a basket of stocks related to battery metals mining, production, or related industries. Investing in ETFs can provide broad exposure to the overall growth of the battery metals market.
- Research and Due Diligence: Staying informed about the latest market trends, technological advancements, and government policies is crucial for identifying emerging investment opportunities. Conducting thorough research and due diligence on potential investments helps investors make well-informed decisions and navigate the evolving landscape of the battery metals market.
By carefully considering these strategies and keeping a close eye on market developments, investors can position themselves to capitalise on the expected battery metals boom and the surging demand for EVs.
The trick is deciphering which strategy works best for you and which sits best with your own risk tolerance, as this is a very personal thing to you, and no one can tell you how your own investment style and journey ought to be. And you need to fully understand the applicable risks before proceeding.
However, we are here to give you as much knowledge on the subject as we can fit in here. So, let’s move on to where the energy market is going…and where the opportunities might then be.
Rising demand for energy storage solutions
You’ve no doubt heard about the increases in the adoption of renewable energy sources, such as solar and wind power.
Well, solutions like these have collectively led to a growing need for efficient energy storage solutions.
How else are we to power all those huge electricity-powered processes when the sun isn’t shining or when the ‘old faithful’ methods blow out?
Battery metals play a crucial role in enabling energy storage systems to manage the surplus power that’s generated during peak production periods.
And it’s precisely this type of rising demand that presents another significant opportunity for investors!
As renewable energy sources are intermittent in nature, energy storage systems help bridge the gap between power generation and demand. Lithium-ion batteries, which use battery metals like lithium, cobalt, nickel, graphite, and manganese, have emerged as the leading technology for grid-scale energy storage.
Grid-scale energy storage systems offer several benefits, some of which might include the stabilisation and management of electricity grids or integrating renewable energy strategies.
But what exactly does that entail? Let’s break it down.
Stabilising electricity grids
These systems store excess electricity generated during periods of low demand and release it during peak demand. By balancing the supply and demand of electricity, they help stabilise the grids and ensure a consistent and reliable power supply.
Mitigating grid stress
Energy storage solutions help alleviate stress on electricity grids during peak demand periods. By discharging stored energy, they can provide additional power to meet high demand, reducing the strain on the grid infrastructure.
Integrating renewable energy
Energy storage systems facilitate the integration of renewable energy sources into existing power grids. They store the excess energy generated by solar panels or wind turbines and release it when there is low or no renewable energy generation. This ensures a continuous power supply, reducing reliance on fossil fuels and promoting a clean and sustainable energy mix.
But the benefits don’t end there.
Investors have recognised the lucrative opportunities presented by the rapid growth of the EV market and the increasing demand for energy storage solutions, yes, but where would we be without governments worldwide backing the transition to cleaner energy alternatives?
Of course, these transition initiatives are heavily leaning towards EVs and renewable energy, with it being possibly the most viable and large-scale option to date that promises to make the changes needed to help the planet.
It’s also that tunnelled focus on this market that has been sending the share prices of lithium and other critical metal and mineral miners surging — which is only natural, given the global scale to which this industry is being pushed, and at top speed.
Government support for the sector has come in the form of policies, incentives, and regulations aplenty, and it is this kind of support that has played a crucial role in driving the growth of these sectors.
The South Australian Government has introduced multiple subsidies, including a three-year registration fee exemption for new zero-emissions vehicles, or ZEVs, for vehicles first registered until 30 June 2025.
Incentives like this exist right across Australia, from multiple incentives amounting to cost savings of around $5,540 in New South Wales, on top of stamp duty waivers — to further fee and stamp duty waivers in the ACT.
Here in Victoria, the State Government has passed a subsidy worth $3,000 to be applied immediately after purchasing any ZEV. While inarguably generous, this subsidy only stands for the first 20,000 cars and only those of a purchase price of less than $68,740.
As you can see, governments are implementing a cornucopia of measures to promote the adoption of EVs and the expansion of renewable energy generation, and they’re not afraid to put their money where their mouth is.
These policy decisions signal a long-term commitment to sustainable energy solutions, and this has, in turn, boosted investor confidence and driven up the share prices of lithium (in 2022) and other critical mineral miners.
Over 2021, shares were hiking to all-time highs for battery mineral and metals stocks such as nickel and lithium, particularly as EV sales were surpassing $2 million by early 2022.
The surge in share prices reflects investor optimism about the future prospects of the battery metals market.
As governments continue to support the growth of electric vehicles and energy storage, the demand for battery metals is expected to increase even further, with the global net zero carbon emission target scheduled for 2050 and many stepping stones to have been achieved by 2030.
This trend has created attractive investment opportunities for those looking to capitalise on the rising demand for battery metals and the evolving energy landscape.
Sure, it’s a known fact there’s plenty of money in these critical metals. But the real question is, out of all those miners gunning for the position of producer and supplier number one — which ones are actually the most promising?
It is worth noting that while lithium has garnered significant attention, other battery metals like cobalt, nickel, graphite, and manganese also play vital roles in energy storage solutions.
Investors should consider the broader battery metals market to diversify their investments and take advantage of the overall growth potential in the sector.
Main idea:
The battery metals boom is set to explode with the rapid expansion of the electric vehicle (EV) market, creating unprecedented demand for metals such as lithium, cobalt, nickel, graphite and manganese. With significant growth projections in both EV adoption rates and energy storage solutions over the coming years, investors should consider exploring investment options within this burgeoning industry.
The electric vehicle market boom
Now, let’s talk a little more about the EV market and where that seems to be heading.
The global EV market is forecast to grow exponentially.
We don’t say this lightly. In fact, the market has been forecast to reach a tenfold increase by 2025 and an astounding fiftyfold growth by 2030.
Investors should consider the potential opportunities in this booming sector and check out those critical minerals at the forefront of the industry.
With increasing concerns about climate change and air pollution, governments around the world are implementing policies that encourage the adoption of clean energy technologies like EVs.
As we mentioned earlier, Australia has brought in plenty of support for the mass adoption of ZEVs around the nation.
But what are the other ways they’ve ramped up the net zero campaign not only here but around the world?
Well, there’s US President Biden, who has put millions behind America’s clean energy boom, determined to help Americans accelerate the production of affordable electric vehicles.
Biden intends to have America 50% electric by 2030, with a multitude of public and private commitments in place to support what he has called the ‘EV Acceleration Challenge.’
Thanks to these initiatives, there are now more than three million EVs on the road and more than 135,000 public EV chargers throughout the US nation.
And in Europe, the crackdown on pulling away from Russian energy has put even more pressure on the continent’s shift to alternatives.
Since Russia’s invasion of Ukraine, the EU has vowed to end its dependence on Russian fossil fuels by 2027, with the game plan being to achieve this mostly through locally produced, low-carbon energy.
China is aiming to reach net-zero emissions by 2060. This will require trillions of dollars of investments in green and low-carbon industries and an understanding of the country’s transition pathway.
On the other hand, there is China, hoping to reach net-zero emissions by 2060, a decade longer than most other countries also committed to the cause.
Even so, China’s commitment will take trillions of dollars that are to be invested into green and low-carbon options, not to mention some meticulous planning for its transition pathway to become a success.
In order to get there, China hopes to raise its non-fossil fuel share of primary energy to about 20% by 2025, and by 2030, it hopes to reach 25%.
The consequence of our collective lavish utilisation of carbon emissions throughout history has meant that many countries have declared their intention to transition away from internal combustion engine vehicles in the near future will be the quickest and easiest way to restore some health back to the planet.
As a result of these factors, combined with advancements in battery technology and decreasing costs of production, analysts predict significant growth within the EV market.
Since the adoption of the Paris Agreement to stop or at least slow global warming, around 33 countries and the European Union have committed to the cause in either law or policy, and more than 100 counties have either proposed or are still considering their own net-zero targets.
The motivation is there, the support is there, and so the competition for the best battery metal producers is certainly on.
Rising demand for energy storage solutions
Beyond transportation applications, there is also growing interest in using batteries for large-scale energy storage systems.
It is believed that these can help balance supply and demand on power grids while integrating renewable sources like solar or wind power for existing infrastructure.
The need for efficient energy storage solutions has led to increased investments in research and development projects aimed at improving current battery technologies.
It has also boosted research and investment into discovering new materials capable of storing even greater amounts of electricity per unit weight/volume than today’s leading options do, and in doing so, further driving up overall consumption levels across various industries involved within the manufacturing process itself (e.g., mining).
Government policies supporting clean energy initiatives and decarbonisation efforts are lending the industry an even greater edge, making it easier for companies in the mining and producing industry to work with the initial capital needed to get things going and ramp up operations.
As the industry grows, backed by all this government support, innovations within extraction processes that improve efficiency while maintaining green credentials will too.
All of this is contributing massively to an industry that can only expand to fulfil our needs in the future. With so much growth potential, these are the days to get savvy and see where you can invest.
Of course, it will take plenty of risk and research to pinpoint budding industries and companies that may one day become mega-billion-dollar renewable energy battery corporations, leading the world’s energy and distributing satisfying dividends.
The impact of government policies on mining companies
So, we already know governments all over the world are creating more avenues of support to increase their prospects of renewable energy supplies, but how does it work?
As you would expect, policies such as tax incentives, subsidies, or grants can significantly impact the growth potential of mining companies involved in producing battery metals.
For example, President Biden’s infrastructure plan includes provisions specifically designed to boost domestic production capacity within the United States. He chose to facilitate this by offering financial support mechanisms aimed at helping industry players expand operations more rapidly than would otherwise be possible without assistance from federal authorities.
Ultimately this then leads to higher revenues across the board throughout the entire sector overall (i.e., both upstream/downstream segments alike).
The surge in lithium miners’ share prices has been a major boon to investors, but the battery metals market is much more than just lithium. As governments look for ways to reduce emissions and promote green technology development, diversifying metal supply chains will become increasingly important.
Main idea:
The EV market is set to grow exponentially, creating unprecedented demand for battery metals like lithium and cobalt. This boom in the EV industry has led to surging share prices of lithium miners, with government policies supporting clean energy initiatives and innovations within extraction processes contributing to increased investor interest.
Battery metals beyond lithium
While lithium plays a crucial role in battery production, other metals like cobalt, nickel, graphite, and manganese are also essential components of modern batteries used in EVs, as well as in those energy storage systems we keep hearing about.
These elements offer additional investment opportunities within the broader battery metals boom, so it’s worth getting to know more about them.
A diverse supply chain for these critical materials is necessary to ensure that the global demand for electric vehicles and clean energy solutions can be met.
A fine example of this is cobalt and nickel, with demand for both of these metals expected to jump 500% by 2050, driven primarily by their use in high-capacity batteries.
Let’s break down each of these EV heavyweights and see what they have to offer:
Cobalt:
This metal is vital for maintaining stability in high-voltage lithium-ion batteries. However, ethical concerns surrounding its mining practices have led some companies to explore alternative sources or reduce dependency on this material.
- Cobalt production faces ethical concerns mainly due to child labour issues in artisanal mines located in the Democratic Republic of the Congo. Because of issues like these, and also for fear of resource depletion at some stage in the future, companies like Tesla are actively seeking cobalt alternatives or ways to reduce its usage in battery production, while other companies are focusing on sourcing cobalt from more ethical and sustainable mines.
Nickel:
Nickel’s ability to increase energy density makes it an important component of many battery chemistries. As more manufacturers shift towards higher nickel content batteries, demand will continue growing over the coming years.
One of the best things about nickel in batteries is that it can help drive higher energy, better storage capacity, all at a lower cost. As research and development into nickel advances, the metal will increase its role in energy storage systems and battery markets at a competitive cost rate and will increase its market share.
Graphite:
Used as anode material in lithium-ion batteries due to its excellent conductivity properties, increasing adoption rates of EVs are likely to drive up graphite consumption significantly.
The majority of graphite is produced in China using environmentally harmful processes. However, new technologies, such as the proprietary purification process developed by Nouveau Monde Graphite, aim to produce high-quality graphite with minimal environmental impact.
Manganese:
Manganese serves as a key ingredient in certain types of cathodes found within rechargeable lithium-ion cells; it helps improve overall safety while reducing costs associated with manufacturing processes.
Manganese extraction can result in water pollution and deforestation. To address these issues, companies like South32 have implemented stringent environmental management systems at the company’s operations. Additionally, research into recycling manganese from end-of-life batteries is underway to help alleviate pressure on primary resources.
Potential impact on green technology development
Something worth thinking about is that as the demand for battery metals increases, so does the need to develop environmentally sustainable extraction and production methods.
Many of these crucial metals and the correlation to their growing importance in EV batteries has led researchers to explore innovative ways of reducing their environmental footprint, as well as many companies looking for ways to mine and produce them more effectively.
New technologies are being developed that aim at extracting these materials more efficiently while maintaining their green credentials. One example of such innovations is Blackstone Resources’ 3D-printing technology, which allows for a more efficient use of battery metals like cobalt and nickel during manufacturing processes.
Recycling initiatives are also gaining traction as a means to recover valuable materials from end-of-life batteries.
Companies like Li-Cycle have developed advanced recycling solutions that can extract up to 95% of critical battery metals from spent lithium-ion cells — an essential step towards creating a circular economy within this sector.
The potential of battery metals beyond lithium is immense, and the development of new technologies can help meet the increasing demand for these resources.
It’s for reasons such as these that innovations within extraction processes are key to ensuring a balanced resource availability with sustainable practices.
Main idea:
The battery metals boom goes beyond lithium, with cobalt, nickel, graphite and manganese also being essential components of modern batteries. A diverse supply chain for these critical materials is necessary to meet the growing demand for electric vehicles and clean energy solutions while developing environmentally sustainable extraction and production methods. Recycling initiatives are gaining traction as a means to recover valuable materials from end-of-life batteries.
Meeting demand through new technologies
As we mentioned earlier, demand for battery metals continues to rise steadily, thanks to the growing EV market and clean energy initiatives worldwide.
And it’s this accumulative demand that is calling for more innovative technologies to be developed so that companies can extract these materials more efficiently while maintaining their green credentials.
These advancements may help meet some projected demands without compromising environmental sustainability goals, but ultimately when you’re looking at investing in companies on the ASX within the mining and battery metals sector, it’s a good idea to make sure their game in this department is strong.
Researchers are exploring and deploying novel extraction techniques to maximise efficiency while reducing environmental harm, which makes them stand out to investors who are concerned about this sort of thing, as well as with the government, making them more favourable to benefit from initiatives, loans and advances.
One such company that has some great practices in this department is diversified miner Rio Tinto, which has partnered with EnergyX to produce low-carbon lithium using a novel process called Lithium Direct Extraction (LDE).
This method is expected to significantly decrease water usage, land disturbance, and greenhouse gas emissions compared to traditional mining techniques.
Other similar breakthroughs in nickel extraction have been making waves — such as a technique known as High Pressure Acid Leaching (HPAL). This technique allows for lower-grade ores to be processed more economically, using temperatures around 255 degrees Celsius, high pressure and sulfuric acid to separate nickel and cobalt from the ore.
Australian company Clean TeQ Holdings Limited is developing its Sunrise Nickel-Cobalt-Scandium Project utilising this very technology. With all key permits and approvals in place, the company believes its Sunrise Project to be well placed to become a strategic supplier of battery raw materials and aluminium-scandium alloys for the lithium batteries market, with laterite resources rich in nickel, cobalt, and scandium.
In the coming years, it will be crucial for mining companies and technology developers to continue advancing sustainable practices that balance resource availability with responsible extraction methods. This will ensure a steady supply of battery metals without compromising the environment or social values.
The development of new technologies for the extraction and production of battery metals is essential to meet increasing global demand.
To ensure a sustainable industry growth, it is important to consider factors such as production capacity and pricing trends that could potentially impact market conditions.
Main idea:
Innovative technologies are being developed to extract battery metals more efficiently while maintaining environmental sustainability goals. New extraction methods, such as Rio Tinto’s Lithium Direct Extraction and Clean TeQ Holdings’ High Pressure Acid Leaching, aim to increase efficiency and reduce environmental impact. It is crucial for mining companies and technology developers to continue advancing sustainable practices that balance resource availability with responsible extraction methods in the coming years.
Production challenges and price implications
The cost of lithium and nickel has skyrocketed due to the difficulty in meeting increased demand from various industries, particularly in the automotive industry.
This surge is largely due to the challenges faced by mining production in keeping up with the growing appetite from various industries, including the automotive sector.
In this section, we will discuss factors affecting mining production capacity and price trends that could potentially impact industry growth.
Mining companies face several obstacles when trying to ramp up their production of battery metals such as lithium and nickel. Some of these challenges include:
- Resource availability: The scarcity of high-quality deposits can limit a company’s ability to increase its output quickly.
- Environmental regulations: Strict environmental policies may slow down or halt projects aimed at expanding mining operations, particularly those involving sensitive ecosystems or endangered species habitats. For example, concerns over water usage have led some Australian states to impose restrictions on new lithium mines, while water use stress has been flagged for at least 23 projects across drier regions in Western US, South America, and Australia.
- Funding constraints: Raising capital for large-scale projects can be challenging for smaller miners who lack established relationships with major investors.
- Labour shortages: Skilled workers are essential for efficient mining operations; however, competition among companies within booming sectors like EVs can lead to labour shortages and increased wage costs.
Price trends and potential impact on industry growth
If mining production fails to keep pace with the surging demand for battery metals like lithium and nickel, prices will continue to rise. This could have several implications for the industry; an increase in production expenses, worldwide EV adoption rates (or lack thereof) and more development in alternative and competitive markets.
The industry may be faced with increased production costs with higher raw material prices, leading to increased manufacturing costs for battery producers. This could also be passed on to consumers in the form of higher-priced electric vehicles and energy storage solutions.
If this were to ensue, it would have a ripple effect on slower EV adoption rates, and if EVs become more expensive due to rising battery metal prices, this could slow down their widespread adoption.
One can only imagine what that might do. For one, it could potentially impact government targets for reducing greenhouse gas emissions, change the global perception, and plan for reaching net zero.
- There, of course, are also certain incentives for alternative technologies. As battery metals become more costly, there may be a greater push towards developing new technologies that rely less on these materials or use them more efficiently.
In light of these challenges and potential impacts, investors should keep a close eye on mining companies and their abilities to scale up production while maintaining cost efficiency and environmental sustainability in the coming years.
This is why it’s always a good idea to do as much research as you can — not only on the industry but each individual company you might be interested in.
By means of ASX updates, financial and operational reports and investor briefings, you can gauge how a company is progressing and what its plans are and can usually determine if its plans align with what’s happening in the wider industry or national interests.
Main idea:
The demand for battery metals like lithium and nickel is surging, but mining production faces challenges in keeping up with this growth due to factors such as resource availability, environmental regulations, funding constraints, and labour shortages. If production fails to keep pace with demand, prices will continue to rise, and this will, in turn, lead to increased manufacturing costs for battery producers. If this happens, it may also potentially slow down the widespread adoption of EVs.
FAQs in relation to battery metals boom
What are the most promising battery metals to invest in during the expected boom?
Lithium, cobalt, nickel, copper, and graphite are some of the most promising battery metals for investment. These elements play a crucial role in electric vehicle (EV) batteries and energy storage systems. The growing demand for EVs and renewable energy is expected to drive significant growth in these markets.
How can investors seek to capitalise on the anticipated mining and commodity boom?
Investors can seek to capitalise on the anticipated mining and commodity boom by investing directly in mining companies or through exchange-traded funds (ETFs) focused on battery metals. Additionally, they can explore opportunities within related industries, such as recycling technologies or new extraction methods that support sustainable practices.
What challenges will miners face when extracting battery metals from mines?
Miners may face challenges such as resource availability, geopolitical risks, environmental concerns, high production costs, stringent regulations, and technological limitations while extracting battery metals. Balancing profitability with sustainability is also a key challenge for miners. These are just some of the risks investors should be aware of when considering investing in this sector.
What environmental impacts could result from increased mining of battery metals?
Potential environmental impacts include habitat destruction, water pollution due to chemicals used in processing ores, air pollution from dust emissions during transportation processes, and greenhouse gas emissions associated with fossil fuel consumption during metal extraction operations.
How will technological advances affect the demand for battery metals in the future?
Innovations like solid-state batteries or alternative chemistries may change demand dynamics for certain materials; however, the overall growth trend should continue due to the increasing adoption of EVs and renewable energy storage solutions. Technological advancements might also improve efficiency and reduce negative impacts associated with traditional extraction methods.
The wrap on battery metals
The requirement for EVs and energy storage solutions is expanding, making battery metals a key factor in the development of green tech.
From lithium miners experiencing surging share prices over the past couple of years, and with a hint of that momentum returning now, to innovations within extraction processes — all of this is proof of the potential of this industry and the possibilities that may help to meet the growing demand for the world’s carbon-free ambitions.
However, production challenges and price implications remain important factors that can affect mining capacity and industry growth — as does the subtle possibility of new technology bringing something new and different to the table in the future.
Yet at the end of the day, diverse metal supply chains beyond lithium will be critical in ensuring sustainable practices as we move towards a greener future in the coming years.
It remains the surest way for governments to make the biggest, most certain dent in cutting back carbon emissions en masse.
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Our team of experts provides comprehensive insights into emerging trends across various industries, including but not limited to the battery metals boom.
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