EV sector to drive Al, Cu, Ni demand in 2023-25: OCE

Australia's Office of the Chief Economist (OCE) predicts a strong electric vehicle (EV) sector will drive firm demand growth for aluminum, copper and nickel in the next two years.

Global EV sales are projected to more than double to 23mn units/yr in 2025 from 11mn units/yr in 2023, according to OCE's latest Resources and Energy Quarterly report on 3 October. It will boost aluminum demand as automakers seek to produce lighter EVs to increase driving range through higher usage of aluminum, which is 10-40pc lighter than steel.

OCE forecasts the export value of Australian aluminum, alumina and bauxite to grow to A$17bn ($10.7bn) in 2024-25 from A$16bn in 2023-24, buoyed by an expected rise in aluminium prices as well as alumina and bauxite export volumes. It forecasts LME spot primary aluminium price to rise from an average of $2,300/t in 2023 to $2,415/t in 2024, before edging further up to $2,500/t in 2025, despite the prospect of rising Chinese aluminium supply and sluggish Chinese economic growth.

Global copper consumption is expected to rise by 1.9 pc/yr to 2025, supported by demand from planned and ongoing infrastructure works as well as a robust EV sector. OCE forecasts Australia's copper export earnings to grow from A$12.3bn in 2022-23 to A$12.5bn in 2023-24, before rising to A$12.8bn in 2024-25, buoyed by rising export volumes but partly offset by weak prices. Higher production from Chile, Peru and Indonesia will cause a surplus in the market despite solid global consumption growth, with OCE expecting the average London Metal Exchange (LME) spot copper price to stay around $8,300/t in 2024 from the second half of 2023, before rising to $9,000/t in 2025.

OCE forecasts global refined nickel consumption to grow by an annualised rate of 5.9pc to 3.5mn t/yr by 2025, driven by construction, industrial and manufacturing sectors in emerging Asia as well as the EV sector. But the nickel market is expected to remain in a state of oversupply owing to robust mined and refined nickel growth from Indonesia and China. Average LME spot nickel price is therefore predicted to fall from $22,000/t in 2023 to $20,200/t in 2024, which will then recover to $21,500/t by 2025 as supply and demand recalibrate.

Australia's nickel export earnings are also predicted to fall from a strong A$5bn in 2022-23 - which was partly supported by decade-high nickel prices at the end of 2022 - to $4.3bn in 2023-24, before recovering to around A$4.5bn in 2024-25, according to OCE.

By Joseph Ho