At this year's AME Roundup, experts discussed the impact of U.S. politics, geopolitical tensions and the new realities facing the resource sector. During the session on commodities and financial markets in Vancouver, BC, key topics such as the rapidly changing metals landscape and where to invest were addressed. Rowena Alavi-Gunn, senior analyst at Wood Mackenzie, began her presentation "Battery Powerplay: Is it still possible to invest in battery metals?" by recounting the challenges facing battery metals in 2024. He mentioned that battery metals have had a difficult 2024 due to low prices, weak demand, rising costs and geopolitical uncertainty. In addition, recent election results and weaker-than-expected demand for electric vehicles may be deterring investors from entering the battery metals sector. However, overall fundamentals remain positive for key metals such as lithium, nickel, cobalt and graphite. Alavi-Gunn suggested that there is an opportunity for countercyclical investment in these metals.
Speaking about U.S. President Donald Trump, Alavi-Gunn stressed that the proliferation of electric vehicles in the U.S. could be hampered by the new administration. Trump could relax electric vehicle compliance standards, reduce subsidies, and impose tariffs on Chinese batteries and Mexican auto imports, which would make electric vehicles less competitive. As a result, U.S. sales of plug-in vehicles could drop from 30 percent to 20 percent, and hybrids would gain market share, reducing U.S. demand for batteries by 20 percent. Outside the United States, however, the global outlook for electric vehicles remains virtually unchanged, with very strong growth projected for the future.
While Trump's decisions on electric vehicle incentives in the Inflation Reduction Act are expected to have little impact on global battery demand figures, Alavi-Gunn noted that the graphite market could be affected by the new administration's policies. If the U.S. advances the inclusion of graphite in the sourcing rules, far fewer electric vehicles will qualify for tax credits due to limited supply that meets the requirements. Despite the current glut in key markets, long-term demand for battery metals is bullish. Lithium and nickel markets are oversupplied driven by increased production in China and Indonesia, but demand is expected to outstrip supply in the 2030s, leading to shortages and price increases. Cobalt also faces a similar long-term oversupply, although the economics of recycling could be a risk.
To meet projected demand growth, billions of dollars in new investment will be needed, especially for lithium. Major mining companies, traditionally focused on iron ore and coal, may have to diversify into battery metals as the market size for these traditional commodities shrinks. Lithium and nickel mines generate slightly lower revenues than copper mines, but remain attractive investment opportunities, especially for companies looking to protect their portfolios in the future. This can be achieved through mergers and acquisitions or the development of new assets. Lithium and copper assets have high premiums, making new developments more profitable, while nickel is cheaper to acquire than to build. However, new projects carry risks, such as permitting delays. Mining companies face competing demands on capital, such as shareholder returns, sustainability and diversification. Although battery metals offer long-term potential, companies must act now to avoid shortages in the future. The current crisis presents a countercyclical investment opportunity in the face of supply shortfalls and expected price increases in the 2030s.
Following Alavi-Gunn's presentation, Emil Kalinowski, director of metals market research at Wheaton Precious Metals, took the stage to continue the discussion. Kalinowski's presentation began with an overview of the geopolitical and economic forces influencing metals markets, highlighting a disconnect between analyst forecasts and historical trends. Kalinowski explained that critical resources have become a key front in geopolitical tensions, along with artificial intelligence, space and strategic waterways. He noted that the metals and mining sector is now a battleground for major powers, and that Canada could be an influential nation in this context due to its role in logistics and supply chains.
Kalinowski also mentioned that, since Trump's inauguration, there have been comments about the possibility of the U.S. absorbing Canada, which some speculate could be motivated by access to Canadian mineral wealth. In addition, the Trump administration has requested rare earths from Ukraine, underscoring the importance of mineral resources in geopolitical politics.
Regarding gold, Kalinowski noted that despite bullish sentiment in the market, some analysts are making bearish projections that do not align with supply projections. He explained that gold supply will decline slightly through 2030, while global gold demand has reached an all-time high, driven by central bank purchases and investor interest. Kalinowski attributed analysts' bearish stance to their failure to fully consider supply constraints and geopolitical factors.
For silver, the consensus is more optimistic, with long-term price growth predictions. Kalinowski noted that silver has growing industrial demand, especially in solar panels, and that government stockpiling of silver could absorb the annual supply. This raises the possibility of silver becoming a strategic asset alongside gold.
As for platinum and palladium, Kalinowski noted that analysts are optimistic about platinum in the long term due to its transition to the hydrogen economy, which will generate ongoing supply shortfalls. On the other hand, palladium faces a massive recycling supply and falling demand, which raises concerns about its long-term prices. While platinum is poised to strengthen, palladium faces pressure due to its unstable fundamentals.
Georgia Williams, Investment News Network.