Bernstein: Lithium Is Most Vulnerable to EV Shifts, While Aluminum Has the Strongest Demand Resilience
Bernstein's annual report revisits three key variables driving demand for EV battery metals: EV sales, battery size and battery chemistry.
Bernstein's annual report revisits three key variables driving demand for EV battery metals: EV sales, battery size and battery chemistry.
Its core conclusion is that lithium is the most sensitive to changes in EV sales. A change of ±1 million BEVs corresponds to approximately 4.0% of global lithium supply. Nickel, copper and aluminum are materially less sensitive because copper and aluminum are used in both batteries and non-battery components, including wiring harnesses, power electronics and vehicle bodies, giving them more inherent demand resilience.
The report also examines a substitution scenario involving a shift from BEVs to PHEVs. If the market tilts toward PHEVs, PHEV penetration could reach 26% by 2040, compared with 10% in the baseline case. Bernstein says the potential impact of this substitution may be overlooked by the market.
The report maintains Outperform ratings on diversified miners including Barrick, Newmont and Rio Tinto.
The broader conclusion for EV battery-metal demand is that lithium is the most vulnerable and aluminum the most resilient. Lithium demand is far more sensitive than nickel, copper or aluminum to changes in EV sales and battery composition, while copper and aluminum benefit from their widespread use in non-battery components.
The note views the setup as favorable for aluminum-related exposure, including diversified miners such as Rio Tinto, because aluminum has the strongest demand resilience. It views the setup as unfavorable for lithium-related exposure because lithium is the metal most sensitive to EV-sales changes; slower BEV growth or a shift toward PHEVs would create the greatest pressure on lithium. The note says the market may be underestimating the substitution effect from PHEVs and the risk associated with lithium's demand elasticity, meaning those risks may not be fully priced in.
Key catalysts identified in the report are the pace of EV-subsidy phaseouts, with BEV subsidies typically higher than PHEV subsidies; monthly regional BEV-versus-PHEV penetration data; changes in the market shares of NMC and LFP battery chemistries; and changes in global supply-and-demand balances for the metals.
Its core conclusion is that lithium is the most sensitive to changes in EV sales. A change of ±1 million BEVs corresponds to approximately 4.0% of global lithium supply. Nickel, copper and aluminum are materially less sensitive because copper and aluminum are used in both batteries and non-battery components, including wiring harnesses, power electronics and vehicle bodies, giving them more inherent demand resilience.
The report also examines a substitution scenario involving a shift from BEVs to PHEVs. If the market tilts toward PHEVs, PHEV penetration could reach 26% by 2040, compared with 10% in the baseline case. Bernstein says the potential impact of this substitution may be overlooked by the market.
The report maintains Outperform ratings on diversified miners including Barrick, Newmont and Rio Tinto.
The broader conclusion for EV battery-metal demand is that lithium is the most vulnerable and aluminum the most resilient. Lithium demand is far more sensitive than nickel, copper or aluminum to changes in EV sales and battery composition, while copper and aluminum benefit from their widespread use in non-battery components.
The note views the setup as favorable for aluminum-related exposure, including diversified miners such as Rio Tinto, because aluminum has the strongest demand resilience. It views the setup as unfavorable for lithium-related exposure because lithium is the metal most sensitive to EV-sales changes; slower BEV growth or a shift toward PHEVs would create the greatest pressure on lithium. The note says the market may be underestimating the substitution effect from PHEVs and the risk associated with lithium's demand elasticity, meaning those risks may not be fully priced in.
Key catalysts identified in the report are the pace of EV-subsidy phaseouts, with BEV subsidies typically higher than PHEV subsidies; monthly regional BEV-versus-PHEV penetration data; changes in the market shares of NMC and LFP battery chemistries; and changes in global supply-and-demand balances for the metals.