Prices of critical metals to keep rising: Patricia Mohr

Electric vehicle (EV) sales in China, Europe and the United States more than doubled last year according to a new report by economist Patricia Mohr.  

According to the former vice-president of Scotiabank and now independent analyst and founder of the publication Critical Metals for a Sustainable World, 6.2 million EVs were sold in the top three markets last year, up from 2.9 million units in 2020.  

China posted sales of 3.3 million in 2021, a 168% year-on-year increase, while in the U.S., EV sales jumped 98.6% to just over 0.6 million units. Sales in Europe rose 66% over the prior year to 2.3 million units. 

“With sales likely to strengthen further in 2022, demand for critical metals will continue to climb,” Mohr stated in her most recent report published on February 16. “Greater infrastructure spending by many governments coming out of the pandemic and industrial retooling towards lower carbon operations are also boosting demand for base metals.”  

Higher EV sales, combined with strong demand for computers, cell phones and wind turbines, has pushed up prices of rare earth elements (REE) in China, the report noted.  

The price of neodymium oxide, a light REE, posted an 89% year-on-year increase to US$173,500 per tonne in mid-February. Heavy REE terbium oxide, which has recently taken some market share from dysprosium in permanent magnets, according to Mohr, climbed to US$2,260 per kilogram in mid-February.   

The average LME (London Metal Exchange) price of nickel rose to US$8.38 per lb. in 2021, up from US$6.25 per lb. in 2020.  

LME nickel prices surged to a ten-year high of US$10.91 per lb. on February 10 before easing back to US$10.73 on February 14.  

Mohr forecasts an average nickel price this year of US$10.19 per pound.  

She cites rising tensions over the Ukraine as one factor that might lead to higher nickel prices. 

“An invasion of the Ukraine by Russia might increase nickel prices, as Russia’s substantial exports of nickel could be disrupted, though we note the recent easing in tensions,” Mohr’s report stated.  

The average price of copper on the LME in 2021 increased to US$4.23 per lb. up from US$2.80 per lb. in 2020.  

Mohr described the current strength of copper prices as “remarkable” given the “significant slowing in China’s economy since last summer.”  

Mohr also noted in her report that for the first time in six years, markets outside of China posted stronger demand growth for copper than China’s own domestic market.  As a result, China’s share of global consumption of copper “may have waned” from 53.7% in 2020 to 51.9% in 2021, which would make it the “first decline” in 20 years.  

As for copper, Mohr expects prices to fall below US$4 per lb. between 2022 and 2023 due to a wave of new mine development, which is expected to include Teck Resources’ (TSX: TECK.A/TECK.B; NYSE: TECK) Quebrada Blanca 2 project in Chile and Anglo American’s (LSE: AAL) Quellaveco project in Peru.  

Declining copper ore grades and depletion, however, suggests a drop in mine production after 2025, the report states, “pointing to a step-up in prices to the US$5 mark.”