Processing minerals in US is a 'midstream anchor' needed for EV supply chain

Limited minerals refining capacity is a crucial bottleneck to fully incentivizing the mining and battery investment sought by the Inflation Reduction Act and the Biden administration, said speakers at an event hosted by the US Chamber of Commerce on July 19.

Panelists and presenters at the "Critical Minerals Summit" in Washington, DC, focused on electric vehicle battery material supplies and the obstacles to significantly expanding a fully domestic US critical minerals supply chain.

Global passenger plug-in EV demand is expected to grow 114.1% between 2023 and 2027 to reach 31.9 million units, according to a June 27 research report by S&P Global Commodity Insights. To support that surge, lithium demand is expected to grow 135% and cobalt demand is forecast to increase by 81.4% over the same period.

China controls the majority of processing of key minerals for global electrification, but it does not contain significant geological deposits of many of those materials. Speakers at the conference argued that if the US is to domesticate its EV supply chain, as President Joe Biden has said he would like, it will need to take control of the midstream processes between raw material mining and battery fabrication.

"We need the midstream anchor to justify building out the other aspects of the supply chain," said Abigail Hunter, director of international affairs and partnerships at SAFE's Center for Critical Mineral Strategy, an energy security advocacy group. "There is no business case for us to turn lithium into lithium hydroxide if there is no cathode active material market domestically to sell it to. We have heard from industry that we are building our supply chains regionally and it does not make business sense to process in the US and then ship the material back to Asia ... especially if the US is importing the mineral feedstock to begin with."

China in the lead

Mining and automaker representatives pointed to China's significant investment across the EV supply chain as a barrier to building out US mineral streams.

"[The US has] allowed others around the world to take over the making of things," said Ryan Modlin, leader of US external and government affairs at diversified miner Rio Tinto Group, referring to previous investments by the Chinese government in materials production. "You're not going to get critical minerals and materials without processing and smelting."

China has also turned its attention to large-scale investments in EV manufacturing capacity, said Omar Vargas, vice president and head of global public policy at General Motors Co.

"While American companies are today [EV] industry leaders, China is investing heavily in the field," Vargas said.

Supply chain difficulties resulting from the COVID-19 pandemic were a key wake-up call that incentivized efforts to onshore supply chains, including for critical minerals, said Modlin.

"Over the last 30 years, the Chinese government has decided, 'we're going to do this' ... then three years ago, COVID hit, and we had a supply chain crunch and we opened our eyes and realized we have to do more here. ... This [supply chain] debate is not mature at all," said Modlin.

Building out policy and processing

There is plenty of room, however, for US companies to invest in the processing space, according to the speakers.

"A significant near-term economic opportunity for the US is in midstream critical minerals processing, as well as precursor, cathode and anode production," Vargas said. "However, these projects take a significant amount of time to be funded, permitted, constructed and tested. Funding to develop important refining technologies and processes and driving further transparency and efficiency in permitting for both mineral extraction and processing are key to unlocking the full potential of jobs, investment and scale in the US."

Hunter said policy changes are another avenue for encouraging a midstream processing build-out.

"Consider ... that 70% of the world's cobalt supply was mined in [Congo], and that 75% of the world's cobalt refining was in China or controlled by China," said Hunter. "The first is a matter of nature, the second is a matter of policy."

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