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Ag Metal Miner

Ag Metal Miner

MetalMiner is the largest metals-related media site in the US according to third party ranking sites. With a preemptive global perspective on the issues, trends,…

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Battery Metal Supply Woes Could Upset The EV Boom

  • The battery metal market has been plagued by supply chain problems.
  • Low supplies are already weighing on automakers, with some of the top manufacturers curbing production. 
  • To make matters worse, some automakers see the chip shortage extending into 2024.

The Automotive MMI (Monthly Metals Index) experienced another decline from June to July. After a -6.53 drop last month, the 30-day price change jumped to -7.77%. As with the previous months, the automotive industrial metal marketplace has been plagued by problems. Curiously enough, it’s supply – not demand – that can’t make any headway towards normalization. Below, we’ll discuss some of the latest news affecting the global automotive marketplace.

Dude, Where’s Our Cars? U.S. Automotive Industrial Metal Tighter Than Ever

Recently, Cox Automotive revised their sales predictions for the rest of 2022. Though all the figures are not yet in, they set their June sales forecast at 13.8 million. This is up from the previous month’s 12.7 million units but far below what we saw in 2021. As if that weren’t bad enough, the company’s current yearly forecast for new vehicle sales remains lower than we saw in 2020. How can a “recovering” industry fail to meet mid-pandemic numbers? Cox was quick to cite inventory as the major driver of the buying slowdown, but analysts certainly aren’t ignoring the worsening global economy. According to Cox’s Senior Economist, Charlie Chesbrough, they have demand, particularly for electric vehicles. However, the roadblocks between raw material suppliers, manufacturers, and consumers just keep multiplying.

Last month, Cox also sounded the alarm about monthly car payments, which had hit a shocking average of $712. Of course, even buyers seeking used vehicles are getting pinched by price increases. Many experts say that it’s frustrating to see so much demand and no supply. In fact, some think it’s only a matter of time before most buyers simply throw in the towel on their new car prospects.

Will this give the supply side the chance to catch up or just toss another wrench into the industry’s sputtering machine?

Manufacturers Think the Chip Shortage May Stretch into 2023 (or 2024)

One of the main factors hamstringing global auto supply is the ongoing semiconductor shortage. Unfortunately, hopes of seeing any relief in this area were dashed yet again at the World Economic Forum this Spring. There, Intel CEO Pat Gelsinger stated that supply problems would most likely continue into at least 2023. He subsequently admitted that 2024 would be more likely.

As with most other commodities, the shortage of microchips is a multifaceted problem. During the pandemic, home electronic sales went through the roof. However, factories were also forced to slow production or shut down entirely. As the Law of Supply and Demand reared its familiar head, it wasn’t long before shortages, and price increases became the norm.

Then came the invasion of Ukraine. This drastically affected the supply of neon gas, which is essential to the conductor market. Russia, on the other hand, supplies between 25% and 30% of palladium, another semiconductor necessity. As sanctions on the country began to roll out, the palladium did the opposite.

GM Removing Non-Essential Functions

Of course, Gelsinger’s announcement was only surprising to industry outsiders. Auto manufacturers have been scrambling for months, trying to find a way to build cars around the shortage. GM removed heated seats from many of the vehicles, telling customers they’d reinstall the feature as soon as chips became available. Other companies started limiting secondary non-essential functions altogether.

Related: IEA Warns World Is Vulnerable To Chinese Solar Dominance

But the news isn’t all gloom and doom. McKinsey & Company recently published an article detailing how the Automotive Industry could circumvent the problem. Though they admit that there are no “short-term” solutions, the company sees the post-pandemic shortage as a chance to shore up supply lines for the future. If chip suppliers and car companies use this as a learning opportunity, it could be the last time we see scarcity on this scale.

Industrial Metal and Cars: The Future is Electric

Despite all the issues plaguing the Automotive marketplace and industrial metal, it’s hard to ignore the fact that we’re in the middle of a tech revolution. A new CBS poll recently found that 59% of Americans are considering buying an electric vehicle. Moreover, sales of hybrids and EVs doubled last year, setting a new record of 6.6 million units.

Of course, this shift was intended to created interest in new technology or a desire to live “more green.” Instead, it’s largely the result of anger and outrage over skyrocketing gas prices. In that way, it’s less like the move from horses to cars at the beginning of last century. Unless the impetus back then was a major surge in the cost of oats.

But it’s important to keep things in perspective. These types of shifts are normally good economic news, presenting opportunities for companies of all kinds to produce new, exciting products and services to support them. For instance, Sony and Honda announced a joint BEV venture. French car giant Renault wants to re-imagine their Alpine sports car with fully electric capabilities.

What’s the Verdict?

The takeaway: more and more people want off gasoline. And whether they go into the future happily or begrudgingly, they are going nonetheless. This means a lot for metals commodities, especially battery-related minerals like lithium, cobalt, and nickel. It means a lot for battery companies, who are pressured by the market to produce newer, better, and more effective products.

Lastly, it means a lot for the balance of the global economy and industrial metal. In the very near future, having oil reserves might not be the economic and international relations “blank check” it used to be. Will it be great? Will it be a disaster? It’s impossible to tell. But one thing’s for sure: it will be different. For those who aren’t enjoying 2022 very much, “different” might be good enough.

By AG Metal Miner 

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