At this year's AME Roundup, experts discussed the impact of US policy, 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 that battery metals will face in 2024. She 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, the 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 US President Donald Trump, Alavi-Gunn stressed that the proliferation of electric vehicles in the US could be hampered by the new administration. Trump could relax electric vehicle compliance standards, reduce subsidies, and impose tariffs on Chinese batteries and Mexican car imports, making electric vehicles less competitive. As a result, sales of plug-in vehicles in the US could fall from 30 to 20 percent, and hybrids would gain market share, reducing demand for batteries in the US by 20 percent. However, outside the US, the global outlook for electric vehicles remains largely unchanged, with very strong growth projected for the future.
Although 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 US moves forward with including graphite in sourcing rules, far fewer electric vehicles will qualify for tax credits due to the limited supply that meets the requirements. Despite the current oversupply in key markets, long-term demand for battery metals is bullish. The lithium and nickel markets are oversupplied, driven by increased production in China and Indonesia, but demand is expected to outstrip supply in the 2030s, causing 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 need 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 they 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 command high premiums, making new developments more profitable, while nickel is cheaper to acquire than to build. However, new projects carry risks, such as delays in obtaining permits. 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 given the supply deficits and price increases expected 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 a description of the geopolitical and economic forces influencing metals markets, highlighting a disconnect between analysts' forecasts and historical trends. Kalinowski explained that critical resources have become a key front in geopolitical tensions, alongside 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 United States 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 policy.
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 demand for gold 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 predictions of long-term price growth. Kalinowski highlighted that silver has growing industrial demand, especially in solar panels, and that government silver stockpiling could absorb 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 deficits. On the other hand, palladium faces massive recycling supply and falling demand, raising 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.