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Are We Really Facing A Battery Metal Shortage?

Nick Cunningham

Tesla says that there could be a shortage of the key metals used in the manufacturing of electric vehicles as a dearth of investment in mining fails to keep up with soaring demand.

A shortage of nickel, copper and lithium could crop up in the years ahead as the sale of EVs continues to climb, Sarah Maryssael, Tesla’s global supply manager for battery metals, told a closed-door Washington conference of miners, regulators and lawmakers, according to Reuters. As a result, the prices for these minerals will likely shoot up.

EVs require higher volumes of these metals than gasoline or diesel powered vehicles. For instance, EVs need twice as much copper. According to Reuters, Tesla is trying to cut its use of cobalt, a critical metal that is overwhelmingly mined in war-torn Democratic Republic of Congo where its production is associated with human rights abuses. Instead, Tesla will need more nickel.

In order to promote more mining, especially within the U.S., Republican Senator Lisa Murkowski (AK) and Democratic Senator Joe Manchin (WV) are proposing legislation that would ease permitting requirements on new mines. The legislation is positioned as a national security concern, clearly with an eye on China. China controls about two-thirds of the world’s battery electric manufacturing capacity, a figure that is expected to rise to 73 percent by 2021, according to Bloomberg New Energy Finance (BNEF). The U.S. only accounts for about 13 percent of global lithium-ion battery manufacturing capacity.

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Much of the world’s lithium is produced in Chile, Argentina and Australia, and a lot of that capacity has been developed by international companies, including American and Chinese companies. But even as China locks up lithium supply in South America, it has also developed lithium production at home. Bloomberg estimates that China has eight times the domestic lithium production capacity than does the U.S.

“It has been decades since a lithium refining facility has been built in the United States,” said Eric Norris, the lithium president of North Carolina-based Albemarle Corp., according to Bloomberg. “Any new project will take time to develop, as the regulatory bodies determine required permits, potential community impact, etc.”

Analysts argue that if the U.S. is to scale up EV manufacturing, it will need supplies of lithium and other metals. “You can’t build half a million electric vehicle battery packs without a secure supply of several critical raw materials,” Chris Berry, a battery-metals analyst at House Mountain Partners, told Bloomberg. “If the U.S. lags in the build out of lithium or cathode capacity, its supply chain dynamism and competitiveness around the new energy theme is put at risk.”

Lithium demand is set to more than triple through 2025, rising from 300,000 tons per year to over 1 million tons per year.

Meanwhile, the World Bank just launched its “Climate-Smart Mining Facility,” the first-ever fund dedicated to promoting sustainable mining for the minerals needed for EVs and renewable energy. The fund will aim to ensure that countries that host much of the mining will actually benefit from the extraction.

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The initiative will promote mining projects that incorporate renewable energy at their operations, crucial since mining accounts for up to 11 percent of global energy use. It will also seek to recycle materials and ensure that mining does not result in deforestation.

The World Bank estimates that by 2050 demand for lithium, graphite and nickel will skyrocket by 965 percent, 383 percent and 108 percent, respectively.

EV sales are rising around the world, and the deployment of solar and wind also continues to scale up. Bloomberg notes that many of these clean technologies actually rely on the same supply chains, and compete against one another for certain high-tech parts. As a result, some solar-component companies have to wait as long as 50 weeks for parts because EV companies are scaling up production, illustrating the bottlenecks that are beginning to appear.

In short, the clean energy transition will require gargantuan volumes of certain metals and minerals, even as the supply of those commodities appears to be lagging behind demand projections.

By Nick Cunningham of Oilprice.com

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