As the electrification of the global economy continues to increase demand for the metals that Norilsk produces, particularly nickel and cobalt, Penny predicts a dramatic shift in commodity demand patterns.
“Like most of these things, the move to EVs will take longer than people think, but when the time arrives, it’ll be even more dramatic,” he says.
Penny notes that hybrid battery vehicles in the United States currently account for 9% of the market, with annual growth of 18%; battery EVs have around 3% market share but growth of 25%. Fuel cell EVs are meanwhile just 1% of the market, but growing at an annual pace of 41%.
Although Norilsk is synonymous with nickel production, roughly 27% of the company’s revenue actually comes from the metal, compared with 30% from palladium. With around 8% of Norilsk’s revenue coming from platinum, over a third of its earnings come from PGMs.
Penny remains unperturbed about the potential loss of demand for palladium – his top commodity pick currently, despite his self-confessed love for diamonds – due to the elimination of catalytic converters as the world electrifies its cars. This is largely because he expects the biggest absolute growth in the next 10 years to be in hybrid vehicles.
“You cannot make a diesel engine a hybrid as you need a very light engine, which is by definition a petrol engine. Palladium is the catalytic converter of choice for petrol engines, while platinum is for diesel,” he says. “We are confident that in the next 10 years, demand for palladium in hybrid vehicles is going to grow very rapidly and probably outstrip the absolute growth of battery and fuel cell EVs,” he adds.
Norilsk might even get involved in new areas of the battery production chain, Penny says, with a joint venture its likely method of entry.
“Norilsk will definitely look at some form of partnership at different levels in the industry in order to maximize the value of its product. That’s something we’re actively considering at the moment,” Penny says. “I don’t know about developing batteries, but we’re looking very carefully at working with European chemical company BASF, with whom we’ve had relationships before.”
See the full interview in the April issue of Metal Market Magazine, which carries in-depth feature articles, analyses and reviews of metal and steel markets.