LME Asia Week 2018: EV metals in the fast lane

Pictured above, from left: Xu Aidong of Beijing Antaike Information Co., Chen Hongliang of Zhejiang Huayou Cobalt Co. Ltd., Ma Weigou of Wanbao Mining Ltd.,
Gao Tianpeng of Jinchuan Group International Resources Co. Ltd. and Jerry Tsui of BAIC Group.

The global market for electric vehicles (EVs)—and the batteries that power them—appears to be putting upward price pressure on nickel, cobalt and potentially copper, according to members of a panel at the LME (London Metal Exchange) Asia Week 2018 Seminar, which took place in mid-May in Hong Kong.

Panelist Jerry Tsui of Beijing-based automaker BAIC Group said that while Tesla often makes the news for falling short of its production goals, BAIC says the overall market for EVs “has gone beyond our expectations.”

The rapidly growing market for EVs and the batteries that power them has led to predictions of supply strains on cobalt, said Chen Hongliang of China-based Zhejiang Huayou Cobalt Co. Ltd. He said some buyers in the EV battery sector “want to fix the price [of the cobalt they are buying] for 10 years,” a circumstance he deemed “unfavorable” for his industry sector.

Fellow panelists Ma Weigou of Wanbao Mining Ltd., Gao Tianpeng of Jinchuan Group International Resources Co. Ltd. and panel moderator Xu Aidong of Beijing Antaike Information Co. Ltd. all said price volatility should be expected for the next several years in the nickel and cobalt markets.

The EV market will bring “tides and currents” in demand and pricing, said Xu, who also commented that while cobalt may hit a price ceiling that will cause battery manufacturers to seek a substitute for it, nickel demand may grow nearly unchecked for years before substitution becomes a factor.

Battery metals composition could change in reaction to rising prices, but the wiring and charging station infrastructure needed to support a growing EV market is likely to provide steady demand for copper if the vehicle market does gravitate toward electric power.

Ma pointed to LME cobalt and nickel contracts as vital in the years ahead. “Market hedging is very critical,” he remarked, calling it “a way to react to volatility.” He added that mining companies such as his would prefer “a stable, long-term margin” rather than price volatility.

LME Chief Executive Matthew Chamberlain said the exchange’s new cobalt and lithium contracts makes it “uniquely positioned to serve the growing lithium battery industry.” Added Chamberlain, “We mean to be a big part of this growth area.”

In an earlier panel discussion, Guy Wolf of London-based commodity brokerage Marex Spectron pointed to nickel as a metal whose pricing “still has residual strength in our estimate.” He said the use of the metal in EVs may be “a little bit of a red herring [but is] positive for psychology” within the nickel market.

His fellow panelist Robert Hawkes of Goldman Sachs International stated, “I don’t think the EV story is a red herring. If you’re in that business, you need to lock in prices now. You don’t know where [metals] prices will be in five years.”

The LME Asia Week 2018 Seminar was Thursday, May 17, at the Hong Kong Convention and Exhibition Centre.