The Great EV Raw Material Disconnect

“Get into the lithium business. Lithium margins right now are practically software margins.” - Elon Musk

Elon Musk’s advice to entrepreneurs has not only gone viral (admittedly that’s not an unusual event) but has resonated throughout the electrification industry as lithium, and other integral battery metals, prices continue to soar. In fact, Benchmark Minerals reports that global weighted average lithium hydroxide prices rose by an astronomical 527% year-over-year as of March 2022. And this doesn’t stop at lithium – it is a trend seen across the entire battery metals industry. In March, the London Metal Exchange was forced to halt nickel trading as prices doubled to more than $100,000 per tonne in a day. So, why such a rapid increase?

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The Road to Electrification

With Bloomberg predicting that 20 million plug-in vehicles will be on the road globally by June, the sheer scale of the batteries required to power these cars has instigated a major initiative across the globe with the rise of gigafactories. Benchmark Minerals reports that “from 3 gigafactories in 2015, we now have 285 gigafactories globally at various stages of planning and construction.”

Battery Metals Requirements

There is no question that gigafactories are seismic battery plants, with a global battery output significantly larger than ever before. But, with the coming of age of electrification, the demand for these batteries has surged from 59 gigawatt hours (GWh) in 2015 to 400 GWh in 2021. And Benchmark Minerals has forecast this figure to grow by a further 50% to 600 GWh by 2022. With this staggering increase in demand comes huge pressure on supply chains to keep up. Currently there are two routes from which battery metals can be sourced: mining and recycling.

A recent paper – ‘Metals for Clean Energy - Pathways to solving Europe’s raw materials challenge’ – looks in detail at the challenges ahead for the sustainable metals market as Europe and the global markets embark on the road to electrification, saying: ‘Decarbonising the global economy and energy sector requires the massive deployment of clean energy technologies within the next three decades’.*

The road to electrification has some significant touchpoints, not least the inflationary influence on future metal prices. When we look at the current future demand forecasts across transport, sustainable power generation and storage, this doesn’t come as a surprise. The mass global adoption of electric vehicles alone has increased pressure on an already-stressed supply chain for the key battery metals – lithium, nickel, cobalt and manganese.

Historically, these metals have only been supplied through mining but now, with a 21st century focus on sustainability and theunderstanding that there is a finite supply of raw materials on Earth,recycling is establishing itself as a participant in the future supply of thekey metals.

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Commenting, Alex Stanbury, CEO of Technology Minerals Plc, said:

“We are definitively in the new realm of the battery, as industries around the globe seek to transition to electrification as a cornerstone of the drive to sustainable energy. Recycling has to form part of that future. Current recycling rates can achieve up to 22% of the valuable metal resources that can be re-used, but that still leaves a significant shortfall, given the future demand curve. That is why we are pursuing our twin-track strategy to bring new and sometimes old resources, until now deemed uneconomic, back into play. The mix of new sustainably mined production and increasing levels of recycled production should be the supply model that can go some way to bridge the resource gap in the coming decade.”

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But, as the situation stands, and with the intense, and rapid, push towards electrification, recycling simply isn’t ready to withstand this pressure alone. Mining is essential, and investing in the mining of battery metals, especially lithium, has, according to Elon Musk, never been more necessary or profitable.

Musk stated that the mining and refining of lithium was the biggest “limiting factor” for electric vehicle adoption globally. Indeed, just earlier this month, the Tesla owner said the company “might enter the lithium mining and refining business itself if costs did not improve.” And Tesla isn’t the only automotive manufacturer to take a similar approach. VW announced in April that it wants to begin nickel and cobalt refining in China. General Motors has gone as far as committing $400 million to build cathode material in Canada. Investing in supply chains appears to be the primary way to bridge the gap in the “great EV raw material disconnect.”

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It’s not just the EV market driving demand – when we consider the transition to electrification in other key sectors, and the increasing pressure that they will each, in turn, place on the supply side of the metals market, it becomes ever more evident that supply simply cannot keep up with demand.

Benchmark Minerals reported in a recent article that since January 2020, lithium prices have increased by over 700%, nickel by 250% and cobalt and manganese by 100%. So, it is unsurprising that they reached the conclusion that: “To have the ultimate sway of industrial power you need to own the mines, in part or in full. This is the only way to guarantee the raw material to make your batteries and EVs.”

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Alex Stanbury, Technology Minerals, says:

“Having spent the last three years curating a portfolio of strategic assets, Technology Minerals has embarked on junior mining and explorative projects across the United States, Europe and Africa.

“The twin-track strategy that Technology Minerals has employed – by earmarking recycling as the future, and retaining a grasp on the mining side of the supply chain – has enabled the company to ensure a safe, secure and consistent supply chain. Its 49% stake holding of early-to-market Recyclus Group ensures that a constant supply of key battery metals is being fed back into the economy on a rolling basis. Sustainability hinges on re-use, re-purposing and recycling, and Technology Minerals, through this venture, have set the wheels in motion to continue accelerating the rapid shift to electrification.”

Footnote:

* KU Leuven, Belgium: www.kuleuven.be

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