EV Dreams And Industrial Metal Nightmares

Includes: GM, NSANF, TSLA
by: John Petersen

The hardest part of blogging about the energy storage and vehicle electrification sectors is coping with ideologues who are so enthralled with their myopic EV dreams that they can't see the industrial metal nightmares that make those dreams impossible at relevant scale in the real world. They whimper, whine and complain about the obscene prices charged by diabolical oil companies and gush over how safe, quiet, clean and secure life will be when plug-in cars with immense battery packs are common as wildflowers in an alpine meadow and getting cheaper every day.

The fly in their soothing balm for the ills of humanity is that electric vehicles and the batteries to power them require immense amounts of nonferrous industrial metals for electric motors, batteries and other essential components.

To begin with, the prices of industrial metals are more volatile than oil prices and they usually increase faster. The following graph offers a seven-year comparison of market prices for Brent Crude and a basket of industrial metals represented by the Dow Jones UBS Industrial Metals Index (^DJUBSIN).

5.5.12 Crude-Metals.png

Nothing in that graph leads me to believe oil prices and industrial metals prices will decouple in the foreseeable future and make dreams of significantly cheaper EVs possible. Technology can do marvelous things with electronic devices made from bits of silicon and plastic. It has little or no ability to improve the efficiency of electric drive components or reduce the cost of large quantities of industrial metals used to make those components. There's always room to nibble around the edges, but electric motors and batteries have been around for a long time and they're not going to get much better.

Simply stated, the dream of falling EV prices is impossible because the underlying technologies require massive inputs of industrial metals.

To make matters worse, global production of energy resources is two orders of magnitude greater than global production of industrial metals. The following table is derived from published industry data and summarizes annual global production of energy resources on both a gross and a per capita basis.

Production Per Capita
(Metric tons) (Kilograms)
Coal 7,229,000,000 1,032.71
Oil 4,866,000,000 695.14
Natural Gas 1,880,000,000 268.57
Uranium 42,700 0.01
All energy resources 13,975,042,700 1,996.43

The next table is derived from statistics published by the USGS and summarizes global production of iron, steel and all major industrial metals on both a gross and a per capita basis.

Production Per Capita
(Metric tons) (Kilograms)
Iron & Steel 1,500,000,000 214.29
Aluminum 44,100,000 6.30
Chromium 24,000,000 3.43
Copper 16,100,000 2.30
Manganese 14,000,000 2.00
Zinc 12,400,000 1.77
Titanium 6,700,000 0.96
Magnesium 5,900,000 0.84
Lead 4,500,000 0.64
Nickel 1,800,000 0.26
Bromine 460,000 0.07
Tin 253,000 0.04
Molybdenum 250,000 0.04
Antimony 169,000 0.02
Rare Earths 130,000 0.02
Cobalt 98,000 0.01
Tungsten 72,000 0.01
Niobium 63,000 0.01
Vanadium 60,000 0.01
Arsenic 52,000 0.01
Lithium 34,000 0.00
Silver 23,800 0.00
Cadmium 21,500 0.00
Bismuth 8,500 0.00
Gold 2,700 0.00
Mercury 1,930 0.00
Graphite 925 0.00
Platinum Group 399 0.00
Beryllium 240 0.00
All nonferrous metals 131,200,994 18.74

The ratios are simple if you forgive a little rounding. For every 100 pounds of energy resources, our planet can produce ten pounds of iron and steel and one pound of nonferrous industrial metals. If you'd rather tighten the focus to oil and the specific industrial metals highlighted in red that are essential for electric drive components, the ratio works out to eleven ounces of industrial metals for every hundred pounds of oil.

The numbers simply can't work. When demand for a particular metal reaches a tipping point where it exceeds supply, the outcome is always the same; a price spike that lasts until supply and demand are brought back into balance. We’re already going through the first modern example with rare earth metals. Their prices increased by more than 1000% over the last couple years and the market is responding by developing new mines that will hopefully bring supply and demand into balance at a higher metal price over the next few years. Until balance is restored, metals that were relatively cheap and available before the inflection point will be difficult to obtain and prohibitively expensive.

All of the metals produced last year were used to make the necessities and luxuries of life for the planet's seven billion inhabitants. There is no slop or surplus in the industrial metals supply chain and while production of some metals can be increased with massive investments in new mines and production infrastructure, the required level of new investment can only increase price pressures and make metals that are very expensive today even more expensive tomorrow. There is no way to insure that incremental metal production will be dedicated to a particular use and there are plenty of competitive uses.

Just last week a group of technology titans including Google (NASDAQ:GOOG) executives Larry Page and Eric Schmidt announced the launch of Planetary Resources, a venture that hopes to mine asteroids for industrial metals. While I can't comment on the business merits of their new venture, the fact that these men are investing their own money in off-planet exploration for industrial metals that the earth can't produce in sufficient quantities speaks volumes.

The bizarre theory of electric drive as packaged by EVangelicals and their eager commercial accomplices at Tesla Motors (NASDAQ:TSLA), Nissan Motors (OTCPK:NSANF), General Motors (NYSE:GM) and others is that humanity can increase its consumption of scarce industrial metals including copper, manganese, nickel, rare earths, cobalt and lithium for the sole purpose of giving EV owners the dubious luxury of replacing energy from oil with energy from coal, uranium and natural gas. The idea that all natural resources are worth conserving never even enters the picture.

EVs cannot change global production of energy resources or the emissions from using those resources. Since the planet only has one atmosphere, the idea that moving emissions from Point A to Point B is somehow "virtuous and green" has all the intellectual integrity of a no peeing zone in a swimming pool.

The world currently produces enough industrial metals to make a few electric vehicles for eco-royalty who don't care whether their choices make economic sense. It cannot produce enough industrial metals to make affordable electric vehicles, or for that matter make enough electric vehicles to put even a tiny dent in global oil consumption.

No matter how the ideologues and their commercial accomplices twist, distort and spin the facts, electric vehicles cannot make a society or the world a safer, quieter, cleaner or more secure place to live. They're selling snake oil promises based on the gullibility of politicians and the general public and the absurd proposition that humanity can waste materials that are a hundred times scarcer than the energy resources ideologues want to replace.

On a micro-scale, electric vehicles and plug-in hybrids are feel-good eco-bling for the emotionally committed and the mathematically challenged. On a macro-scale they use more energy, emit more CO2 and are more expensive than established HEV technology. They're unconscionable waste and pollution masquerading as conservation.

I'm a lawyer, a battery guy and a policy geek. I know that six billion people on our planet want to earn a small piece of the lifestyle one billion of us have and take for granted. I also know that as a result of the information technology revolution, about half of the six billion have access to electronic data and understand for the first time in history that there is more to life than mere subsistence. Even if we assume that they'll only become consumers at 5% to 10% of purchasing power parity, the increased pressure on water, food, energy and every commodity you can imagine will be immense beyond reckoning. The big challenge will be creating enough room at the table so that we can avoid the unthinkable consequences of inaction.

I like hybrid vehicle technology because it minimizes waste of both gasoline and other natural resources. I'd like it even more if it were tied to a compressed natural gas fuel system that would eliminate dependence on imported oil, but that's a different discussion. I'm also a big fan of micro- and mild-hybrid vehicles that use less robust electric motors and simpler batteries to reduce waste for the masses that can't afford to upgrade to an HEV. I'm deeply offended by P.T. Barnum class hucksters that use the false promise of electric vehicles to create bloated market capitalizations and lead investors down a primrose path that's certain to end in massive losses for the gullible.

Disclosure: None.

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