Mining sector could be impacted by thriving EV sales
The sales of electric cars are booming, but the rising demand for transition minerals will pose a challenge for the mining industry.
The global electric car fleet is expanding rapidly. While Tesla was dominant in the electric vehicle (EV) market for several years following the launch of its first EV in 2008, other car manufacturers are making strides and quickly turning their fleets electric.
General Motors (GM) announced that they will invest $35bn in EV and autonomous vehicle (AV) product development spending until 2025 and that they will phase out petrol and diesel-driven cars by 2035. Volkswagen wants half of its vehicle sales to be electric by 2030 and nearly fully electric by 2040. Audi will only launch new fully electric models from 2026 and aims for all car sales to be electric in 2030.
The transition from petrol to electric vehicles is an important step in the move to a net-zero future. According to the IEA net-zero pathway, more than 60% of passenger car sales globally must be EVs by 2030 to be on track for net-zero by 2050. That is 18 times more than EV sales in 2020. By 2050, all cars must run on electricity or fuel cells.
EVs’ mineral requirements
Some progress is already being made. While the sale of cars with other fuel types went down globally by 16% due to the pandemic in 2020, sales of EVs and fuel cell vehicles increased 29% compared to the year before. However, with the transition from petrol to electricity come challenges, especially for the mining sector. With the demand for EVs growing rapidly, the demand for commodities used for EVs is also expected to grow.
Based on the type of EV, different battery types could be used. Most batteries used in EVs are lithium-ion batteries. The minerals needed for these batteries can differ based on the chemistry of the cathodes, but lithium, cobalt, nickel, graphite, and manganese are considered to be the key materials needed to make these batteries.
According to data from the IEA, an electric car requires six times the amount of minerals that a conventional petrol car need. The challenge for the mineral sector lies in keeping up with this demand.
“Today, the data shows a looming mismatch between the world’s strengthened climate ambitions and the availability of critical minerals that are essential to realising those ambitions”, said Fatih Birol, executive director of the IEA in a special report on the role of critical minerals in clean energy transitions.
According to Birol, governments must act now to reduce the risks of price volatility and supply disruptions.
“Left unaddressed, these potential vulnerabilities could make global progress towards a clean energy future slower and more costly – and therefore hamper international efforts to tackle climate change.”
The total mineral demand for EV and battery storage in 2020 was 0.4 Mt. Based on the Sustainable Development Scenario (SDS), the IEA predicts that the demand will grow more than 30 times, to 12.7 Mt in 2050. If the prediction is based on the climate-driven scenario of net zero by 2050, the demand will grow more than 40 times. Of all the minerals, lithium is expected to experience the biggest growth, followed by nickel and graphite.
The special report states that it is unlikely that the required mineral demand will be met, based on today’s mineral supply and investment plans. While some minerals are expected to have a surplus soon, the organisation predicts that in the mid-to-long term, demand will surpass the expected supply from existing mining projects. Investments in new projects are needed to meet the growth in demand.
The demand for lithium is expected to experience the biggest growth
Forecasted mineral demand of the EV sector according to the IEA’s Sustainable Development Scenario in thousand tonnes.
Who controls the EV supply chain?
Another challenge for the future supply chain is that unlike some fossil fuels, many of the minerals essential for EVs are produced in just a handful of countries. Over half of the supply of minerals needed for EV batteries comes from the top three producing countries.
In 2020, Australia was responsible for 48% of global lithium production. For graphite, China is the world’s main supplier, with nearly 79% of global production originating from the country. In the same year, the Democratic Republic of the Congo (DRC) supplied 69% of global cobalt.
The increasing demand for minerals has led to warnings about the increase in battery cost. The pack prices of lithium-ion batteries hit an all-time low in 2021 with $132/kWh, due to the improved technology and the increase in production scale. A decade ago, the lithium-ion pack prices were still more than $1,200/kWh. However, BloombergNEF’s annual battery price survey predicts that costs could rise in 2022 due to the impact of rising commodity prices.
The IEA warns of the significant effect that the raw material costs could have in the long-term. “A doubling of lithium or nickel prices would induce a 6% increase in battery costs. If lithium and nickel prices were to double at the same time, this would offset all the anticipated unit cost reductions associated with a doubling of battery production capacity.”
Mineral production of three biggest suppliers as a proportion of global production in 2020
Europe and the US struggle with mineral supply
Improving the security of supply of these minerals and creating less dependency on other countries is already at the forefront of many governments’ minds. In late 2020, the EU added lithium to their List of Critical Raw Materials, which contains a total of 30 critical raw materials.
Maroš Šefčovič, Vice-President at the European Commission, said that Europe will need up to 18 times more lithium by 2030 and up to 60 times more by 2050 for e-car batteries and energy storage alone. Currently, the EU supplies only 1% of its demand for battery raw minerals.
“We cannot allow to replace current reliance on fossil fuels with dependency on critical raw materials. This has been magnified by the coronavirus disruptions in our strategic value chains. We will therefore build a strong alliance to collectively shift from high dependency to diversified, sustainable and socially responsible sourcing, circularity and innovation.”
Meanwhile, US President Joe Biden rolled out his ambitious Build Back Better act, which includes the goal to have half of the new cars sold in the country being zero emission by 2030. Yet, the same administration doesn’t yet seem to have taken steps towards securing a stable supply chain to achieve those goals.
Just last week, the government cancelled the mining leases of Twin Metals Minnesota to mine for cobalt, nickel, and copper. Currently, there is only one operating mine in the US that produces nickel. And even though the country has large reserves of lithium, there is only one big operating lithium mining project: the Silver Peak Mine in Nevada.
Car manufacturers are securing their own supply
With growing concerns about the supply chains, car manufacturers themselves have started looking for solutions to secure their production of EVs.
American manufacturer General Motors developed a battery that needs 70% less cobalt for its EVs. Other manufacturers are also shifting away from using cobalt in the cathode chemistry process and developing cobalt-free batteries, due to the rising price of the mineral and humanitarian issues in the DRC. Human-rights organisations, such as Amnesty International, have expressed their concerns about humanitarian issues in the cobalt mining industry in the DRC, due to the poor regulations of the sector, human rights violations, and pollution.
Tesla has shortened the supply chain by making deals with mining companies. The company signed a deal with Talon Metals for nickel supply in the US and with Australian-based Syrah Recourses for graphite supply. Other companies are collaborating with battery companies to expand the production of EV batteries. In collaboration with SK Innovation, Ford announced plans to open battery factories in the US. In Europe, Volvo and Northvolt teamed up to build a joint battery manufacturing plant in Sweden.
“Our new battery plant will support our ambition to have a fully climate-neutral manufacturing network and secure a supply of high-quality batteries for years to come,” said Javier Verela, head of engineering and operations at Volvo about the collaboration.
“Through our partnership with Northvolt, we will also benefit gently from an end-to-end battery value chain, from raw material to complete car, ensuring optimal integration in our cars.”