Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Bitcoin, Crypto Market Black Swans from Google to Obsolescence - 1st Aug 21
Gold Stocks Autumn Rally - 1st Aug 21
Earn Upto 6% Interest Rate on USD Cash Deposits with Binance Crypto Exchange USDC amd BUSD - 1st Aug 21
Vuze XR VR 3D Camera Takes Near 2 Minutes to Turn On, Buggy Firmware - 1st Aug 21
Sun EXPLODES! Goes SuperNova! Will Any planets Survive? Jupiter? Pluto? - 1st Aug 21
USDT is 9-11 for Central Banks the Bitcoin Black Swan - Tether Un-Stable Coin Ponzi Schemes! - 30th Jul 21
Behavior of Inflation and US Treasury Bond Yields Seems… Contradictory - 30th Jul 21
Gold and Silver Precious Metals Technical Analysis - 30th Jul 21
The Inadvertent Debt/Inflation Trap – Is It Time for the Stock Market To Face The Music? - 30th Jul 21
Fed Stocks Nothingburger, Dollar Lower, Focus on GDP, PCE - 30th Jul 21
Reverse REPO Market Brewing Financial Crisis Black Swan Danger - 29th Jul 21
Next Time You See "4 Times as Many Stock Market Bulls as There Are Bears," Remember This - 29th Jul 21
USDX: More Sideways Trading Ahead? - 29th Jul 21
WEALTH INEQUALITY WASN'T BY HAPPENSTANCE! - 29th Jul 21
Waiting On Silver - 29th Jul 21
Showdown: Paper vs. Physical Markets - 29th Jul 21
New set of Priorities needed for Unstoppable Global Warming - 29th Jul 21
The US Dollar is the Driver of the Gold & Silver Sectors - 28th Jul 21
Fed: Murderer of Markets and the Middle Class - 28th Jul 21
Gold And Silver – Which Will Have An Explosive Price Rally And Which Will Have A Sustained One? - 28th Jul 21
I Guess The Stock Market Does Not Fear Covid - So Should You? - 28th Jul 21
Eight Do’s and Don’ts For Options Traders - 28th Jul 21
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will the Electric Car Revolution Sink Platinum and Palladium?

Commodities / Platinum Aug 20, 2017 - 12:26 PM GMT

By: Arkadiusz_Sieron

Commodities

Everyone has probably heard about the upcoming electric car revolution whose vanguard is Tesla Motors led by Elon Musk. The electric car is actually nothing new – the first vehicles were produced as long ago as in the 1880s. However, the mass production of cheaper gasoline vehicles triggered by Henry Ford put electric cars into limbo for decades. But this can change quickly thanks to the rapidly falling costs.


As one can see in the chart below, the price of a battery pack declined from $1000 per kWh in 2010 to $227 in 2016. The price of a Tesla battery pack is believed to be even lower now, at about $190. When battery pack prices fall below $100 per kWh, which is likely to happen around 2025, the sales of electric vehicles may soar, as such learning curves imply that electric cars will be cheaper to buy than traditional vehicles in most countries.

Chart 1: The average EV battery pack price ($ per kWh) since 2010.

Until then, the range and charging anxiety should be also overcome through a comprehensive charging network – once that happens, mass adoption should quickly follow. And investors should remember that although up-front costs are still higher, the per-mile fueling cost and maintenance costs are lower (most repairs are caused by the internal combustion engine), which should additionally support the shift toward electric cars.

Indeed, electric cars will account for 14 percent of global car sales by 2025, according to the UBS, while the Bloomberg argues that electric vehicles will reach 54 percent of new car sales by 2040. Stanford University economist Tony Seba is even more optimistic about electric vehicles: he believes that all cars will be electric (or hybrid electric) by 2025. Anyway, the age of electricity has begun: although electric vehicles account now for only a few percent of the automotive market (but in Norway electric or hybrid cars represented half of new registrations in the country so far in 2017) and there are still many problems, such as lithium-ion production capacity and the costs of batteries, plunging battery prices would accelerate the shift into electric cars.

The conclusion is clear: the relative performance of gasoline and diesel cars is much less important than the ongoing trend towards electric vehicles, as market shares both of diesel and gasoline vehicles are set to decline in the future. The gasoline vehicles will suffer less, but they will be harmed too. Hence, the dominant demand source for both platinum and palladium is likely to enter a secular bear market. Thus, don’t hold your breath waiting for a rebound in platinum, as it was historically undervalued relatively to palladium. During paradigm changes historical relationships break up. It is more probable that palladium will follow platinum after a while than vice versa, as the automotive demand for the former metal will also decrease, but later and by a smaller percentage. Assuming that the Bloomberg’s forecast is realized, the global market share of diesel vehicles will plunge by about 75 percent until 2040 (from about 20 percent to 5 percent), while the global market share of gasoline share will sink only about 50 percent, from about 80 percent to 40 percent.

One could say that since the automotive sector accounts for about 80 percent of demand for palladium and for about 40 percent of demand for platinum, the former metal may actually be hit harder in the long-run. However, it would be the case under a scenario of flat total automotive sales. But with the 33-percent expected increase in new light duty vehicle sales overall by 2030, platinum is likely to suffer more. One thing is clear: although there may be some short-term volatility, neither platinum nor palladium look as attractive as a long-term investment as does gold.

While the platinum-group metals (we mean here platinum, palladium, but also rhodium) are likely to be the biggest losers (according to the UBS, the demand for them would decline by 53 percent in the world with only electric cars), other metals will benefit from the revolution. Clearly, lithium demand will soar, as most electric vehicles use lithium ion batteries (however, investors should remember that lithium is relatively abundant, while scientists are already working on solid-state batteries which do not have to rely on lithium). The same applies to cobalt and manganese. The production of each of these metals is expected to rise more than 100-fold from 2015 to 2023, while the demand for graphite, nickel and aluminum are forecasted to soar about 65 times in that period. The market in rare earth elements, neodymium in particular, could also rise.

The gold market and silver market should not be significantly impacted by the upcoming changes in the automotive sector, unless silver-zinc technology becomes the standard for electric car batteries. However, electric car revolution could affect the silver demand indirectly, through making solar energy more competitive (charging an electric vehicles could optimize the use of solar electricity). This is important because solar panels use silver for the electrical conductivity.

There is one important caveat to our analysis: predicting technological revolutions is prone to error. The pace of transition to the electric cars may be quicker than expected, but may be also slower due to the lithium-ion batteries’ energy density limitations or range reasons. And the negative impact on the platinum-group metals may be less severe, as the electric revolution will not displace traditional powertrains, which uses platinum or palladium autocatalysts in the medium and heavy truck markets. Another issue is that only electric battery vehicles are the threat for precious metals, while hybrid cars still need them (and at the end of 2016 the latter accounted for about 40 percent of all electric cars). Finally, we cannot exclude that the fuel cell technology, which uses a lot of precious metals, will not develop sufficiently to support the demand for platinum or/and palladium. Hence, although the long-term implications of the electric car revolution for the precious metals market seem to be huge, the near and medium-term the impact may be limited.

Thank you.

If you enjoyed the above analysis and would you like to know more about the gold ETFs and their impact on gold price, we invite you to read the April Market Overview report. If you're interested in the detailed price analysis and price projections with targets, we invite you to sign up for our Gold & Silver Trading Alerts . If you're not ready to subscribe at this time, we invite you to sign up for our gold newsletter and stay up-to-date with our latest free articles. It's free and you can unsubscribe anytime.

Arkadiusz Sieron
Sunshine Profits‘ Market Overview Editor

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Arkadiusz Sieron Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in