The dictionary defines a “jack of all trades” as someone who has a wide array of gifts and is to be admired accordingly. The term fits Elon Musk perfectly. Whether as co-founder and CEO of electric car pioneer Tesla, with his aerospace firm SpaceX or lately as a major shareholder and potential buyer of the messaging service Twitter, the 50-year-old can certainly juggle many balls at once. While not without controversy, he casts a spell over the masses, with more than 93 million users following Musk on Twitter alone. It’s quite possible that the born entrepreneur will soon get actively involved in mining too. At any rate, Elon Musk has recently shown himself to be open to Tesla investing in a mining company. “We will address whatever the limitations are on accelerating the world’s transition to sustainable energy,” he stated at the “FT Future of the Car 2022” conference.
In this case Musk is inspired much less by the pioneering spirit or – as with the Twitter bid just put on ice – the fight for freedom of opinion than by a looming bottleneck in raw materials. A secure and sufficient supply of a huge range of materials is regarded as a central criterion for the long-term success of e-mobility. The average electric car contains some 80 kilograms of copper, which is roughly three times the quantity of the red metal that goes into a combustion vehicle. The global copper market, though, is everything but oversupplied: behind the mining considerations of Elon Musk is likely to be in particular the need to secure the supply chain for batteries. The cathode of an NMC111 battery delivering 30 kWh of power – the type used in standard mid-range cars – contains just under 40 kilograms of raw materials. Alongside manganese and cobalt, these include lithium and nickel (see graph). Elon Musk sees the last of these materials as a possible impediment to Tesla’s ambitious growth plans.
It is not only the industry leader that craves nickel – demand is also growing rapidly among the traditional carmakers, who are backing e-mobility with a passion. Goldman Sachs expects the requirement for nickel from this sector to rise from 176,000 tons last year to 1.4 million tons by 2030. If this demand is to be met, production of the industrial metal will have to expand sharply. In the current year, according to figures from the International Nickel Study Group (INSG), the amount mined globally should reach around 3 million tons in total. More than two thirds of this quantity is needed for the production of stainless steel. Excluding the coronavirus-hit 2020, the nickel market in recent years has been significantly undersupplied, with production in 2021 lagging behind demand by almost 170,000 tons. The INSG reckons the situation is easing, predicting a surplus for the current year (see graph).
Nevertheless, the price of nickel has risen markedly over the last few months. One ton currently costs just under USD 33,000, about two thirds more than at the start of the year. The war in Ukraine is also playing a role in the rally, with some 16% of global nickel being mined in Russia. At present Chile, Australia and Argentina boast the largest lithium deposits. The alkaline metal has likewise become considerably more expensive. According to calculations by Benchmark Mineral Intelligence, the price rose by 280% last year and doubled once again in the first quarter of 2022. Here too, there is growing doubt as to whether the mining industry can supply sufficient quantities of the metal, which is predominantly obtained from solid rock and brine. Elon Musk spoke about this raw material in the video conference on Tesla's latest quarterly figures, encouraging entrepreneurs to get into the lithium business. “We think we're going to need to help the industry on this front,” Musk said in April. It’s possible that he himself will soon get serious about it. What is certain, at any rate, is that the battery supply chain is set to remain in the focus of the motor industry. Shares from this sector could be correspondingly attractive for investors, all the more so given that these companies do not just supply the vehicle sector. Indeed, the raw materials giants are now real jacks of all trades who supply key materials to a huge range of industries.
e=expected; source: INSG; as at: May 2022 Past performance is not a reliable indicator of future performance.
View more information on investment solutions on the topic “E-Mobility: supply of raw materials the key to success”
