FEATURE: Strategic metals availability may jeopardize EV targets: industry

Strategic or critical metals availability at the right price may threaten some countries' ability to meet electric vehicle take-up targets, disordering the energy transition, key metals industry players told S&P Global Platts.

Nickel, cobalt and lithium used in EV batteries, copper for charging infrastructure and rare earths for EV motor magnets are among materials critical for transport decarbonization. Their availability may be tight worldwide, and potentially more acute in the US and EU, where significant investments are underway in building gigafactories to produce EV batteries.

US short on rare earths

Dan McGroarty, advisory board member of USA Rare Earth, a company pioneering development of an integrated heavy rare earths project in Texas and Colorado, said in an interview that the US will "never" meet its electric vehicle sales targets -- including a pledge by California to phase out internal combustion engine vehicle sales by 2035 -- without a domestic and regional supply chain in rare earth mining and processing, including magnet production.

China, which currently accounts for 85% of global processed rare earth supplies, is meanwhile well on track to surpass its new energy vehicle sales target of 20% of its market by 2025, according to consultancy CRU.

"We have previously noted the US will need at least ten times the rare earth metals it currently has to meet its 2030 goals," McGroarty said. "That was made before COP26 and other green initiatives had been initiated this year by the new administration. Therefore we now believe that the deficit is even higher, particularly with the current rare earth supply chain challenges involving China."

The US government, under its Defense Production Act Title III program to ensure timely availability of essential domestic industrial resources, has designated a "national emergency" status for the rare earth supply chain, McGroarty said.

"Growing technological demand on the rare earths -- in wind power, EV drive trains as well as existing demands for REEs in consumer electronics and other industrial sectors -- puts pressure on supply in the US and worldwide," he added.

Lithium seen tight in Europe

In lithium, regional tightness is expected in the UK and EU, forcing dependence on Chinese or Latin American production, despite an EU goal to achieve 80% regional self-sufficiency in lithium by 2025. The UK plans to phase out gasoline and diesel passenger vehicle sales by 2030 and EU nations by 2035.

In the UK, Britishvolt is set to start up a major new gigafactory in Q4 2023, and yet domestic commercial lithium production is foreseen for 2024 at the earliest. In the EU, a clutch of new batterymaking capacity will find it hard to source lithium locally with European Metals' Cinovec project in the Czech Republic, the region's first battery-grade lithium mine, set to start up in 2024 and Savannah Resources' project in Portugal still several years off.

A Savills Research report circulated by Britishvolt cites carmaker Tesla as saying that in order to ramp up production to 500,000 cars per year the company alone would require today's entire worldwide supply of lithium-ion battery production. And this would only cover a fraction of the demand; according to US automotive sales data there are roughly 17 million new passenger cars and light trucks sold each year. The UK has seen around 2.3 million new cars registered annually, again highlighting the global shortfall of lithium-ion batteries for EV manufacturing, the report maintains.

COP26 transport pledge lackluster

Geopolitical and social concerns also surround future supplies and prices of cobalt -- more than 60% of global supplies of which come from the Democratic Republic of Congo -- and copper -- where community opposition has delayed new projects in the Americas -- as well as nickel, which is currently in deficit.

Fears of shortcomings in domestic or regional supply chains may explain why only 33 nations worldwide signed up to the transport pledge of the United Nations' COP26 Climate Change Conference last month, which commits to working toward 100% zero-emission vehicle sales by 2035 at the latest in leading markets, and by 2040 globally. Major car-making nations the US, Germany and Spain were notably absent from the signatories' list: carmakers including BMW, Honda, Daimler, Toyota, Volkswagen, and China's SAIC Motor, also refrained from signing.

Recycling to play role

For Benedikt Sobotka, co-chair of the Global Battery Alliance, a multi-stakeholder initiative for establishing a sustainable battery value chain, and CEO of miner Eurasian Resources Group, the increased demand for commodities and metals used in EV batteries and the sustainability of their production is a matter of "growing concern" in a scenario where EV sales globally rose 40% last year to a record 3 million despite overall car sales falling by 16% due to the pandemic -- pushing some metals prices to multi-year highs. Numbers of EVs on the roads are forecast to reach 120 million by 2030, up from 5-6 million at present.

"Recycling is critical to ensuring the battery market can keep up with the ever-growing demand from the EV sector, and to guarantee a sustainable battery supply," Sobotka said in a statement sent to Platts.

Related podcast: Breaking the myths on battery recycling

High-performance recycling of EV batteries has the potential to supply around 10% of battery materials, worth around $10 billion at current values, and set to grow, he said.

For the time being, however, recycling may not fill the supply gap.

By 2030 "secondary supply will not make up for a supply imbalance for the three critical battery materials, [lithium, nickel and cobalt]," consultancy WoodMackenzie said Dec 8. By that time used EV batteries will only be starting to become available for recycling, according to analyst Max Reid. "The resulting supply imbalance will leave independent recyclers, especially in North America and Europe, in a scramble for used EV batteries," Reid said in a research report.