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The Environment is Driving the New Resource Boom

Dr Stephen Bartrop - Breakaway Research - 01-Dec-2017

There is a developing boom occurring in commodity markets and while it may have been led by lithium, and later cobalt, it will impact more common bases metals like copper, nickel, aluminium and tin. What is driving this is the evolving perceptions in the penetration growth of electric vehicles in the broader vehicle market. At first there was the novelty factor and that penetration was expected to be relatively modest but over the last 12 months this has changed to one where the vehicles will be cheaper than conventional vehicles – including purchase as well as ongoing running costs, charging stations are being established along major routes and the technology is improving to provide longer distance travel.

 

Breakaway Research believes that the real change in mindset occurred when it became evident that electric cars will become cheaper than conventional cars and the market realised that economics would deliver higher than originally expected penetration rates.

 

Forbes in the US predict that EVs are likely to represent at least 65% of sales in 2050, and with strong technology cost declines or high oil prices could even represent 70-75% of sales in that year.


It expects declining electric vehicle (EV) costs, growth in charging station access, and increased familiarity and acceptance by the public will underpin this growth. These figures are typical of Europe and elsewhere. Figure 1 outlines three projections in the penetration of electric vehicles in the total Light Duty Vehicles (LDV) in the US.


                                                            

While Australia is relatively insulated from overseas developments and there are significant distances involved in country travel, there are a number of mitigating factors. In NSW, 
peak road user group, the NRMA, has plans to establish a network of 40 stations of fast-charging stations for electric and hybrid cars in NSW at a cost of $10 million. McDonalds' is 
also considering installing charging stations at its outlets along the major highways.

On the other side of the country in WA the RAC has also been active on the EV front, installing many charging stations in the South West as part of its Electric Highway. This includes
WA's first Supercharger station in Bunbury, which will allow drivers to add 270km of range in about 30 minutes.

With availability of charging stations becoming more prevalent and faster charging times, environmental pressure will increase to Governments to actively promote electric vehicles. 
Imagine the following scenario that play out if this pressure comes to bear:
  • Removal of the Luxury Car Tax. This is still applicable on zero and low emitting vehicles above a nominal retail price threshold. The RACV has been advocating its removal.
  • A significant reduction in State vehicle registration and State stamp duty costs attaching to qualifying EVs.
  • Potential for drivers of qualifying vehicles to use transit lanes and preferential parking arrangements.
  • State and Local Governments to provide convenient charging points
Combined with low purchase and running costs, these changes could result in a major ramp up in electric vehicle penetration along with the economic and social impacts. While we
are primarily focused on metal demand - particularly base metals (copper, nickel, cobalt, zinc, aluminium) and lithium, there are other factors to consider. These include the lower
rates of mechanical servicing required given the simpler engines to a major decrease in fuel consumption while household and elsewhere, electricity demand will increase with the
nightly charging of batteries.

In our analysis, Australia has been relatively immune to the electric vehicle penetration but this is not the case in many places overseas. In particular, in China we have had many
months of pollution crackdowns by the Government in a range of industries while in the cities it is the electric vehicles which are perceived to be the solution. In more extreme cases,
countries like France have stated that it will ban all petrol and diesel cars by 2040. The next resources boom will be 'driven' by demand for electric vehicle and necessary metals that
they require.



Excerpt of the Breakaway Mining Research Weekly/Fortnightly Report dated 10th November 2017, written by Dr Stephen Bartrop - Managing Director Breakaway Research.

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