In times like these, there's always talk of hunting for opportunities, and when it comes to narrowing in on sectors with high growth prospects, you can't look past the electric vehicle revolution and the growing demand for precious metals (Lithium, Graphite, Nickel & Cobalt). Find out more below... The electric vehicle revolution is a megatrend set to play out for decades with colossal demand growth forecasts for electric vehicles, the batteries that power them, and their supply chain materials. Some of you may remember the lithium boom of 2017-18, in which lithium carbonate prices peaked at more than US$21,000 per tonne before the market was flooded with supply and prices fell back to earth. Yet that "boom" was based more on expectation than actual electric vehicle sales. What's different now is that the demand is real and is only increasing. Global electric vehicle sales doubled in 2021 from the previous year. Since sales of combustion engine vehicles peaked in 2017 and are now in permanent decline, this growth will only continue. Current State of the MarketIt's a market still in its infancy — just 10% of all car sales last year were electric or hybrid vehicles, yet sales were double that of the previous year (Tesla smashes sales record in Australia), and by 2025 electric vehicles are predicted to make up almost one-quarter of all new passenger vehicle sales. The desire to address climate change and wean off fossil fuels has driven much of the electric vehicle sales growth to date, while government and corporate efforts to electrify transport provide a solid floor under further growth. However, increasing demand for electric vehicles is straining mining capacity. With demand for lithium-ion batteries set to grow six-fold by 2032, global automakers face significant challenges securing raw materials as they look to scale up production, according to Benchmark Minerals Intelligence (BMI) — a leading price reporting agency and market intelligence provider for the lithium-ion battery to the electric vehicle supply chain. There's no question that the supply of lithium, graphite, nickel and cobalt will need to rise to keep pace with demand — hundreds of new battery metals mines are needed to come online over the next decade. BMI estimates that 336 new graphite, lithium, nickel and cobalt mines will be needed by 2035 (based on average mine size). Lithium Supply-Demand ChallengesLithium, specifically, is facing an acute supply shortage and expanding market deficit through 2030, as seen in the below chart. To meet anticipated demand, BMI says 74 new lithium mines (with an average size of 45,000 tonnes) are needed by 2035 (or 59 mines, including forecast recycled lithium volumes).
Already the biggest producer and exporter of lithium, Australia is responsible for producing over half of the world's lithium supply and is set to remain the dominant producer of lithium this decade. There are currently 13 mines producing lithium-containing spodumene rock in Australia, with key producers being:
One exciting trend is automakers ensuring supply into the future by taking positions in lithium producers (and explorers), such as Toyota with Allkem, Ford with Liontown Resources, and Great Wall with Pilbara Minerals. Broadly, Australia's position is proving quite lucrative, and it is set to continue capitalising as demand ramps. In the 2022 financial year, the value of Australian lithium exports rose almost fivefold to US$5 billion, up from US$1.1 billion in FY 2021. As for the current financial year, the Department of Industry predicts a near-tripling in the value of lithium exports to $13.8 billion due to the combination of sharply higher prices and much higher export volumes. This export value is calculated on an average price for spodumene concentrate of US$3,280 per tonne, compared to the US$400 per tonne that spodumene concentrate was fetching just two years ago. Alongside the rising prices, Australian mines will benefit from higher lithium export volumes that by FY 2024 are expected to be almost double the volume shipped in 2021. The TAMIM investment team identified this shift towards electric vehicles as part of a change in how we move people and objects as a significant investment opportunity just before the COVID pandemic. The subsequent work on this thesis resulted in establishment of the TAMIM Global Mobility Fund in February 2021. This fund invests in the autonomous and electric vehicle sector. Portfolio manager Ryan Mahon believes that this "is going to be the biggest technological revolution of our lifetime... and few are paying attention", using comparisons to the internet revolution. With the benefit of hindsight, we can see that we have been early on this investment call, especially in light of the recent changes to global interest rates and supply chain issues. The good news is that it is creating opportunities to invest into businesses at significantly lower levels than we have seen over the past couple of years. TAMIMs' global mobility strategy utilises long and short equity investments to capitalise on the $7 trillion autonomous vehicle revolution. By analysing first, second, and third order effects, the unit class invests into companies that should benefit from autonomous transportation—from semiconductor chip manufacturers and telecommunications service providers to rare earth miners (Lithium, Graphite, Nickel & Cobalt). In parallel, the global mobility unit class takes short positions against businesses that could suffer losses from these same trends—from car dealerships and insurance companies to roadside motels and parking lots. For more information, please visit our factsheet, or click here to request the Information Memorandum.
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