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Australia's metal and mining sector in the driver's seat for EV metals sprint

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As the world looks to EVs to reduce its reliance on fossil fuels – the metals and mining sector is expected to be the beating heart of the solution.

Australia is the biggest exporter of lithium, accounting for 27 per cent of all known deposits and more than half of global production. It also has 22 per cent of the world’s nickel deposits, 13 per cent of copper deposits and is the world’s third-largest producer of rare earths.

Add to this a number of mineral sands critical to the production of low-carbon industries and Australia is set to become a powerhouse for the global transition to cleaner energy.

The size and scale of this transition is immense.

Electric Vehicle Recharging Battery

By 2030, electric vehicles - including both fully electric and plug-in hybrid models - are estimated to make up 35 per cent of new vehicle sales globally, according to a forecast included in the International Energy Agency’s annual Global EV Outlook report.

Benchmark Mineral Intelligence projects that $US514 billion needs to be invested across the battery chain globally to meet forecast demand in 2030 – some $US220 billion of that in upstream mining alone.

For Amanda Taylor, managing director and head of large corporates and sustainable finance for HSBC Australia, there are windfall opportunities surrounding transition metals and minerals.

“Whether it’s companies or countries, there’s an economic advantage to getting this right, and with the world focused on ESG impacts across the supply chain, transparency in execution will also be a focus,” Taylor says.

While slow to move on its advantages compared with the United States, Australia, she says, is now waking up to the opportunities stemming from a wholesale move to electrification.

It goes beyond the replacement of cars with EVs. We’re now replacing many of our energy sources with electricity which means demand for batteries and other technologies that can help store and regulate the usage of electricity for consumers is going to go up exponentially as well. These are the things now driving investment.

Amanda Taylor | Managing Director and Head of Large Corporates and Sustainable Finance for HSBC Australia

The problem for Australia, she says, remains achieving the scale necessary to become a renewables superpower.

While the growth rate in investment has accelerated, the level of investment is still small.

Partly, this has reflected Australia’s slow start to the energy transition. While renewables investment is expected to continue to increase sharply, it is unlikely to meaningfully impact the macro-economic outlook until it reaches much higher levels.

Peak bodies in Australia agree.

According to the Clean Energy Council, Australia is deploying new large-scale generation – wind and solar farms – “more slowly than needed to reach the 82 per cent target for renewable energy on the National Electricity Market”.

For Michael Willoughby, global head of metals, mining and transition materials at HSBC, those companies that can engage successfully with global capital markets will be best placed to benefit from a move to electrification.

With a Western capital market that has a lower appetite for risk, customers and governments in emerging markets are stealing a march on their counterparts in developed countries.

Co-operation, he says, will be critical to gaining a foothold in the most lucrative global markets to emerge since the pandemic.

If you take EVs as an example, every country in the world is focused on an end to end EV supply chain. One of the challenges is that the EV supply chain looks a lot like the semiconductor supply chain in which there is no one country, and no one company, that controls the supply chain but at each level of product, it’s quite consolidated,

Michael Willoughby | Global Head of Metals, Mining and Transition Materials for HSBC

“The fastest way to transition is for those that have different comparative advantages to link up. Right now, China’s is the biggest link in the EV supply chain, simply because their capital markets support that sort of investment a lot more than Western capital markets do.”

While equity markets should be among the most attractive sources of capital for the mining and resources sector globally - especially at the pre-production stage - Australia’s capital markets are often not deep enough, or don’t always have the risk appetite, to fund large capex development and processing technology research and development.

HSBC, says Willoughby, is ideally placed to facilitate the growth of Australia’s resources sector due it is depth of experience in mining debt finance in Australia.

HSBC’s global network also allows mining companies to access finance in the international markets – from traditional western investors in the global debt capital markets and increasingly from investors in Asia.

“We play across the whole spectrum of commodities and pretty much every geography,” Willoughby says.

“Our strength is that we don’t look at it like an Australian business, or an Indonesian business or a US business - we look at it as an ecosystem.”

As appeared in the Australian Financial Review

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