Article 3 Ways Electric Vehicles Will Impact Commodity Demand

3 Ways Electric Vehicles Will Impact Commodity Demand

What to expect in a world with an increasing amount of electric cars

The transportation industry is reaching a critical point, as it begins to seriously ask – how many consumers will continue to sever ties with the gas pump?

Will 2020 be the year that pushes electric vehicles (EVs) closer to even higher market shares?

In the first half of 2019, electric vehicle sales were double from the year before, although they were still largely overshadowed by their fossil-fueled predecessors. With many new electric models launching, the growing technology of lithium-ion batteries, vehicle-to-grid (V2G) innovations, and massive corporate investments in EVs – the tipping point for electric autos may be closer than we think. Knowing this, commodity markets will undoubtedly shuffle with continued adoption of EVs.

Below are three ways electric vehicles will affect commodity markets, and insights on how to prepare.

1. The explosion of lithium, cobalt, and nickel markets

Lithium, cobalt, and nickel’s small markets should spike with any notable increase in EV demand. Since these metals are limited and the most commonly used metals in creating electric car batteries, a supply crunch could eventually occur.

“It’s dawning on North America and Europe that there’s a raw materials issue that needs to be addressed here,” metals company CleanTeQ’s Chief Executive Officer Sam Riggall told Bloomberg in early July 2019. “Getting the quantity of nickel that [electric vehicles] will need by the mid-2020s will be a challenge … with lead times often up to 10 years, investment needs to happen now.”

It is uncertain when the demand of these metals will spike. What is certain, however, is that real-time visibility into your trading operations will allow for physical and financial clarity when this volatility eventually hits.

2. Issues for power infrastructure

Currently, most electric grids can support today’s EVs. However, as the demand for electric vehicle charging stations continues to grow, the power infrastructure will have to adapt. For instance, peaks in overnight power usage may start to become regular occurrences, as it would be the prime time for EV owners to charge their vehicles. Power organizations may need to find smart ways to even out surges. One idea would be for suppliers to offer incentives to those who charge their EVs in the middle of the day, taking excess low-cost energy off the grid. No matter what steps are taken to offset spikes, patterns in power usage may need to be altered over the coming years.

Also, the rise of EVs may hike the demand for power in developing countries. In turn, countries like India and China may have to quickly expand their generation capacities to match growing power consumption. Especially since existing capacities have not been enough to cover all of their needs. The strain on local distribution networks in highly populated countries with lacking infrastructure will increase as electric vehicle adoption continues.

As commodity organizations become barraged with even greater amounts of data to analyze and sift through with surges in power usage, they will need to power their decision support with advanced analytics to manage these ever-growing complexities and the wealth of data they’re sure to produce.

3. More adhesives and sealing in electric car manufacturing

Believe it or not, electric cars require more adhesives and sealing than internal combustion engine (ICE) cars. According to The Adhesive and Sealant Council, the absence of engine noise, more acoustic dampening through seals is necessary to mask noises such as wind and tires. Then, heat absorbing structures around EV batteries require adhesive fixing, while EV’s special body structures need reinforcement solutions.

The following chart shows how battery-powered electric vehicles (BEVs) will require substantially more adhesives and sealants than hybrid electric vehicles (HEVs).

Source: The Adhesives and Sealants Council

As the adhesive and sealant industries grow, the question remains if there are enough manufacturers globally to handle both existing customers as well as emerging electric car manufacturers. Adhesive and sealant shortages will need to be considered and carefully handled. Also, commodity players will require comprehensive risk management to closely watch capacity and value chain issues that may arise with the uptick in global demand for adhesives and sealants.

Managing volatile commodity shifts with CTRM

The commodity market players who will be the most successful when instability strikes, will be prepared with the right toolset. ION Openlink’s leading CTRM solution delivers unmatched trading, risk management, logistics, and regulatory compliance across commodity industries.

Learn more about how Openlink gives commodity organizations the tools they need to drive smarter, faster decision-making during uncertain times. Stay ahead of inevitable shifts in commodity markets, as EV usage continues to grow.

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