Copper to win from electric cars — BHP
This year looks set to be the “tipping point” for electric cars, says Arnoud Balhuizen, chief commercial officer at global miner BHP, with the effect to be felt first in the metals market and only later in oil.
“In September 2016, we published a blog and we set the question — could 2017 be the year of the electric vehicle revolution?” said Balhuizen. “The answer is yes … 2017 is the revolution year we have been speaking about. And copper is the metal of the future.”
Europe has begun a dramatic shift away from the internal combustion engine, although globally there are only about 1-million electric cars out of a global fleet of closer to 1.1-billion.
BHP forecasts that could rise to 140-million vehicles by 2035.
“The reality is a mid-sized electric vehicle still needs subsidies to compete … so, a lot will depend on batteries, on policy, on infrastructure,” Balhuizen said.
Electric cars are expected to soon cost the same as traditional vehicles — as early as 2018 by some estimates.
But governments are also getting on board, with China’s subsidies leading the way and Britain becoming the latest country to announce its allelectric ambitions in July.
Balhuizen expects the electric vehicle boom will be felt first in copper, where supply will struggle to match increased demand. The world’s top mines are ageing and there have been no significant discoveries in two decades.
The market, he said, might have underestimated the effect on the red metal: fully electric vehicles needed four times as much copper as petrol cars.
Balhuizen said BHP was well placed, with assets such as Escondida and Spence in Chile and Olympic Dam in Australia.
For oil, though, the effect of the electric car boom may take longer to be felt. Balhuizen said that over the next 10 to 15 years, improvements in the internal combustion engine would be a more significant drag on demand.
China’s effort to build a new Silk Road was another factor influencing demand for commodities, and BHP estimated the effect on steel alone at 150-million tonnes of new demand, Balhuizen said, mostly to be used in structures and reinforced concrete. Spending could top $1.3-trillion.
China produced just more than 800-million tonnes of steel in 2016.
There is little question that Asia requires more spending on infrastructure — the Asian Development Bank estimates that Asia requires $26-trillion in infrastructure investment by 2030. Per year, that was more than double current spending, said BHP.
Belt and Road, as the Chinese initiative is known, was a “tremendous opportunity”, Balhuizen said, acknowledging that there was a risk that big slogans may struggle to translate to profit.