Impact of Electric Vehicles on Commodity Markets

 

The number of electric vehicles has risen significantly. Usage now extends to include public transportation as well as individual cars. This rise in demand can be attributed to several factors including public policy and the rising cost for fuel. Besides this, the increasing awareness of the impact of fossil fuels on the planet has pushed many to opt for a cleaner way to move, the answer being electric cars.

 

This however doesn't come without consequences. The rapid rise in demand has also put a strain on the supply for raw materials especially metals. But what does this mean for commodity markets and trading? Let’s find out the many ways electric vehicles are impacting the market and how you can use this data to get profit.

Contents:

- Rise in demand for supplies

- Lithium

- Nickel

- Aluminum

- Copper

- Oil

- Key aspects of trading

- Final thoughts

Rise in demand for supplies

The high demand for EVs also means that manufacturers require more raw materials. The number of people buying these vehicles has increased. The EV market is expected to grow by 9.2 % by 2028. This rapid rise has been a challenge as companies try to catch up. There are various metals that are used in the manufacture of EVs. Let's look at, and how the demand is being met.

 

Lithium

This is a key component in batteries. If you look at the demand curve it has increased in the last few years. It is proportional to the demand for EVs. The demand is expected to more than double by 2030.

 

The majority of lithium mines are in Australia and Chile. These are the highest producers of the light metal ore. While Australia has been the biggest producer, Chile is slowly inching towards increasing supply. The supply has nearly doubled compared to 10 years ago.

 

Many companies among the top lithium producers have increased their targets in order to meet the high demand. This has been the case in the last 5 years.

 

Nickel

Another important component of batteries, nickel is another metal to look out for. It is a great option because it increases the amount of energy generated from batteries. Aside from this, it has a better energy storage capacity, something that is key for electric cars.

 

The highest producers are Indonesia and the Philippines. Indonesia being the largest supplier has nearly 30% of the global reserves. Ev batteries rely on high grade nickel. While the market has several big players, you can find many companies that can also be dominant contenders. So understanding commodities involves knowing both current niche leaders and emerging companies that could become influential.

 

Even before the significant rise in electric cars, companies had speculated and prepared to meet this demand. The company aims to increase production by 15% by 2030. Other companies such as Brazil's Vale aim to surpass 20% of the current production.

 

Aluminum

Steel has been used over the years when creating electric cars. However, it tends to make cars heavier. A potential solution was replacing some parts with aluminum. This metal is lighter, and therefore a better option. Another advantage is that it improves energy consumption.

 

Although it is more expensive than steel, it is a favorite of many car manufacturers. They are able to replace some steel components with this lighter metal. The biggest supplier is China. It also has the highest demand. In the past, increased supply has resulted in prices plummeting.

 

As we can see China produces a significant amount of global aluminum. Because this metal is seen as a more sustainable solution, the demand will certainly rise not only in the production of EVs but in other areas as well.

 

Copper

EVs rely on the proper infrastructure. One of the limiting factors for adoption is proper charging stations. All types of electric vehicles require this feature. Aside from this, there is a need for proper roads and access to charging stations. A major component is copper. The rise in copper demand has placed a lot of pressure on manufacturers. It is not only used for electric cars but also:

- wind turbines

- power grids

- charging stations

 

Currently, the existing mines are only able to meet 80% of the demand. This number will have to increase to meet the growing need for more electric power charging stations.

The biggest strain will be on suppliers. As the demand for metals continues growing, suppliers will have to increase production. This also means that prices are likely to go high. The stiff competition will also play a huge role in cost of production and availability.

 

Oil

Electric vehicles (EVs) are predicted to cut global oil consumption over time by replacing internal combustion engine cars. Speaking about oil commodities, this move might result in structural changes in the oil market. Market Response here is that oil-producing countries and corporations are diversifying their energy portfolios to protect against falling demand.

 

Key aspects of trading

In case of speculation, traders predict whether commodity prices will grow or decline. If they think the price will climb, they go "long" (purchase). If they believe the price will decline, they go "short" (sell). CFDs frequently enable traders to employ leverage, which means they may manage a large position with a small amount of cash. Leverage can boost earnings, but it can also raise losses.

 

Speaking about volatility, commodities may be extremely volatile, causing quick price shifts. This volatility generates possibilities for profit while also increasing danger. Effective risk management tactics, such as implementing stop-loss orders and regulating position sizes. As well, traders utilize tech analysis, which includes patterns in charts and indicators.

 

Final thoughts

Many companies are preparing for the high needs by increasing mining and production efforts. This is crucial if the supply of electric cars is to continue. For traders, keeping an eye on the various metals that are used for batteries is important.

 

By looking at the rise in demand, it is easy to understand that the value will increase as well. However, this will also depend on the number of suppliers. In a market that is highly concentrated, the value may be lower. As businesses aim to meet demands, it’s crucial to stay up to date with the latest trends, and real-time and fundamental data while using proper widgets for trading!

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