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Sources have said that this will eventually boost battery metals prices but is challenging now amid weak economic output. Rather than set maximum pollution levels by tailpipe, the EPA’s announcement on Wednesday April 12 applies maximum emission levels to carmakers’ overall fleets.
Some public commentators have said the rule “would require nothing short of a revolution in the US auto industry.”
“Depending on the compliance pathways manufacturers select to meet the standards, EPA projects that electric vehicles (EVs) could account for 67% of new light-duty vehicle sales and 46% of new medium-duty vehicle sales in [model year] 2032,” the EPA announcement said.
EVs make up just 5% of current US vehicle production, which is expected to be a boon for many metals.
Still, Fastmarkets sources anticipate difficulties with this legislation, similar to other EV-boosting measures, such as the landmark Inflation Reduction Act (IRA) enacted in August 2022, and California’s outright ban on new combustion engine cars by 2035, also enacted in August 2022.
Sources also noted the lack of US-produced battery and other EV metals, as well as EV charging infrastructure. In addition, EVs are much costlier than conventional cars, which creates a demand-side problem.
There was also the unintended consequence of higher EV metal prices in the US, while other countries reap the benefits from producing them.
Wednesday’s announcement presents a new challenge, Ed Meir analyst at Marex, a global commodities brokers, told Fastmarkets.
“The car companies are in a pickle, and we expect they will put up a fight as they have to produce EVs amid an uncertain demand environment,” he said.
Aluminium, for example, is strongly favored in the EV transition. Many expect car bodies, which are currently produced mostly with steel for cars with internal combustion engines, to be produced largely with aluminium for electric vehicles.
“An EV is basically a battery on wheels so its needs to be lightweight,” which favors aluminium, a second industry source said.
However, shorter-term macroeconomic concerns – high inflation, rising interest rates, bank instability and slowing hiring – have led to minimal aluminium buying, sources in the physical metal trade told Fastmarkets.
“I feel like demand has fallen off a cliff,” a third Fastmarkets source said, adding that he, “could not even give away,” one aluminium product that he trades.
Fastmarkets assessed the aluminium P1020A premium, ddp Midwest US at 25-26 cents per lb on Tuesday April 11, flat from April 6, partially because the London Metal Exchange was closed on April 7 and Monday April 10 for the Easter holiday.
The midpoint of the premium is down from the 2023 high of 29.88 cents per lb on February 7 and down from the all-time high of 40 cents per lb in April-May 2022.
Meanwhile, the three-month aluminium price on the LME has been hovering around $2,300 per tonne, with the price at $2,326.50 per tonne on Wednesday during intra-day trading, down from the psychologically significant $4,000 per tonne intra-day high on March 7, 2022
The EPA plans to hold virtual public hearings for these proposed rules on May 2 and May 3, with the possibility of additional dates to be added.
The EPA announced two sets of standards on Wednesday: “Multi-Pollutant Emissions Standards for Model Years 2027 and Later Light-Duty and Medium Duty Vehicles,” and “Greenhouse Gas Standards for Heavy-Duty Vehicles – Phase 3,” such as delivery and dump trucks.
Still, sources are confident that EVs will eventually boost metal demand, including demand for newer ultra-lightweight and electrical steel grades.
Prices for many metals will rise when EV demand rises, sources said.
EV battery metals, typically nickel, manganese and cobalt (NMC) in lithium-ion batteries, will hugely benefit, and tin, silicon, phosphate and even boric acid are among other materials expected to play a greater role in EV production, sources said.
Copper will also be vital for EV charging stations, sources added.
“[The new EPA ruling] could spur things along, yes,” Meir said. “The administration is realizing that the uptake in EV’s could be lower than advertised and thus to ‘force’ the automakers to make the transition quicker, they are mandating tail pipe reductions, leaving [automakers] no choice but to produce EVs if they are to be in compliance.”
The EPA release said, “Since President Biden took office, the number of EV sales has tripled while the number of available models has doubled. There are over 130,000 public chargers across the country – a 40% increase over 2020.”
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