BHP: This Year is Crucial for the Development of Electric Vehicles, the Metal Market, and Subsequently Oil

It seems that 2017 will be a key year for the development of electric vehicles, estimates BHP’s global mining giant business director Arnoud Balhuizen, predicting that the emergence of new vehicles will first impact metal markets and then oil markets.

– In September 2016, we published a blog in which we asked the question – is it possible that 2017 will be the year of the electric vehicle revolution?, recalls Balhuizen, who is responsible for commercial strategy, procurement, and marketing at BHP.

– The answer is affirmative… 2017 is the revolution we talked about. And the metal of the future is copper, he adds.

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Europe has begun a dramatic process of abandoning internal combustion engines, although there are currently only about one million electric vehicles in the world, compared to a total of 1.1 billion cars.

At BHP, they estimate that by 2035, the number of electric vehicles could rise to 140 million in a favorable scenario.

– The fact is that a mid-sized electric vehicle still needs to be subsidized to be competitive… so their development will largely depend on barriers, regulations, and infrastructure, explains Balhuizen.

It is expected that electric vehicles will soon equal the price of conventional ones – some estimate as early as next year. Governments are also participating in this process, with China leading in subsidies. The UK also joined a group of countries in July that announced ambitions to completely phase out the use of internal combustion engine vehicles.

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From the perspective of raw material producers, the consequences of the rise of electric vehicles will first be felt by copper producers, with supply struggling to keep pace with demand, predicts BHP’s business director.

The largest copper mines in the world are already quite depleted, and larger new deposits have not been discovered for decades.

The market, according to Balhuizen, may have underestimated the impact of the new trend on the reddish metal – electric vehicles require four times more copper than cars with internal combustion engines.

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BHP is in a good position thanks to its mines in Chile’s Escondida and Spence, as well as the Olympic Dam in Australia. Last month, the company announced that it would spend $2.5 billion to extend the lifespan of Chile’s Spence by more than 50 years.

The oil market may feel the consequences of the rise of electric vehicles somewhat later, warns Balhuizen. In the shorter term, over the next 10 to 15 years, improvements in internal combustion engines could significantly curb demand for oil, he estimates.