Thursday, 6 June 2024 Reading time : 3 minutes

Under increasing pressure to meet climate targets, electric mobility plays a central role. The EU has set a target of net-zero emissions by 2050 and plans to have at least 30 million emission-free cars on the roads by 2030. Although sales of electric vehicles (EVs) in the US and Europe have grown by more than 40% year-on-year, the challenge remains significant. To meet the demand for electric vehicles and their batteries, raw materials such as lithium, cobalt, and nickel are required. These materials can be obtained either through new mining or by recycling old EV batteries.

Lithium
Lithium, used for the charge capacity of batteries, is an essential component of lithium-ion batteries used in most electric vehicles (EVs). Lithium is primarily mined in Australia, Chile, and China. Batteries now account for 85% of global lithium consumption, with about two-thirds of that being used for mobility. However, lithium is also used in the production of glass and ceramics, as well as in lubricants and polymers. In 2023 alone, lithium sales increased by 30% compared to the previous year.

Lithium is extracted either from rock, as is the case in Australia, or by evaporating saltwater in salt deserts, such as the Atacama Desert in Chile. Here, brine is pumped to the surface and evaporated in artificial ponds. The Atacama Desert, one of the driest regions on earth, suffers greatly from these environmental impacts, as lithium extraction has a significant impact on groundwater levels.

Cobalt
Cobalt is mainly mined in the Congo and is crucial for the stability and safety of lithium-ion batteries. Around 70% of the world's cobalt supply comes from the Congo, where mining is often associated with human rights abuses and toxic waste. These social issues, along with high costs and supply chain problems, have led to an increased focus on cobalt-free battery alternatives and recycling.

Nickel
Nickel increases the energy density of EV batteries, thus improving the range of vehicles. Indonesia, Australia, and Russia are the main producers of the raw material. Nickel production, especially smelting and refining, requires significant amounts of energy.  Over the past decade, Indonesia has invested heavily in nickel refining and is expected to meet most of the demand growth associated with EV batteries over the next decade. However, many smelting plants are powered by coal-fired power plants, resulting in high emissions. Renewable energy sources are only a limited alternative. For example, smelters require a constant supply of energy, which cannot be guaranteed by solar and wind power. Hydropower and geothermal energy could provide the necessary stability, but are often not available near the raw material deposits.

Recycling of EV batteries
To meet the growing demand for electric vehicle batteries, investment in battery recycling is increasing. In Europe, recycling facilities are primarily located in Central Europe and are divided into spokes and hubs. In the spokes, batteries are discharged, dismantled, and mechanically processed into so-called black mass in the first recycling step. In the second step, valuable materials such as cobalt, nickel, and lithium are recovered from the black mass in the hubs. However, even the recycling process generates toxic waste. In addition, the procedure is highly explosive and poses significant safety risks. Extending the lifespan of batteries is another way of conserving resources. Batteries that are no longer suitable for use in electric vehicles can still store energy and be used as power banks. ar manufacturers such as VW, Daimler, Audi and BMW are pursuing such concepts. 

Investment idea
The dynamic ZKB Tracker Certificate on an EV Battery Basket offers investors easy access to this investment theme. The basket is composed of companies active along the entire EV value chain, including mining companies, battery and semiconductor manufacturers as well as global automotive companies that are focusing their product range on electric vehicles.

Overview ZKB Tracker Certificate EV Battery Basket

Termsheet CHF (Valor 113974949)

Termsheet USD (Valor 113974950)

 

Disclaimer
This communication is for marketing purposes. It is neither an offer nor an invitation to submit an offer, to purchase or to subscribe to securities and does not constitute investment advice. You should consult your advisors before making an investment decision. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, financial condition, development or performance of the issuer to be materially different from any future results, financial condition, development or performance expressed or implied by such statements. The present document has not been drawn up by the research department as defined in the rules of the “Directives on the Independence of Financial Research” published by the Swiss Bankers Association, hence these rules do not apply to this document. If securities are mentioned in the communication, the base prospectus, the final terms and any key information document may be obtained free of charge from Zürcher Kantonalbank, Bahnhofstrasse 9, 8001 Zurich, VRIS, and from www.zkb.ch/finanzinformationen.