Batteries and Chinese transport priorities

Batteries and Chinese transport priorities

by Pininvest Analysis

Cobalt demand 2020 – 2025 on

  • constituents
  • 136.5% 1y performance
  • 33.0% volatility
Check the investment theme exit_to_app

While much is made of announcements by automakers about battery powered line-ups from 2020 on and by governments projecting to take diesel cars off the road in the larger cities, not much is heard about China refining four-fifths of cobalt sulphates and oxides used in lithium-ion batteries - as quoted by The Economist 'cobalt rush' Mar. 22 '18

At this level, automakers attempting to secure their own cobalt supply are in for hard times and the Tesla battery gigafactory and its Japanese partner Panasonic may have to rely on Chinese imports to operate

We assume control of cobalt mining by China is the result of careful planning 

The presence of Chinese companies in Congo, where the main copper resource is to be found, is well documented and we listed the involvement of China Molybdenum , Zijin Mining Group and China Minmetals (CMC), China's largest and highly international metals and minerals State owned corporate group, in various Congolese mines. Non Chinese holdings only appear to involve Glencore (undoubtedly world's largest player) , Canadian Ivanhoe Mining and ERG from Kazakhstan) - See our Gécamines note

Downstream, China is already dominating the production of batteries for the automotive industry with front-runner BYD and fast expanding CATL, a strategy allowing the regulators to manage - and to eliminate progressively - fuel powered traffic 

We suggest the large battery production installed and planned in China will benefit principally the Chinese car industry and that exports to other car manufacturers will turn out to be secondary for two critical reasons

  • environmental concerns in the teeming Chinese cities are paramount
  • transfers from imported fuels to coal powered electricity will be highly beneficial to the country's energy balance

Contractual agreements committing large providers such as Glencore to deliver cobalt to the Chinese battery manufacturers (announced in March '18) demonstrate China's resolve to secure availability at any cost - these commercial deals guarantee volume but (apparently) not price 

Unless new technologies, which no expert seems to expect in the short term, proffer viable alternatives to the lithium-ion battery, mass availability of the Western line-ups in 2020*2025 are in for a rough ride - view our theme  Electrical Vehicles  in Developed Countries