Green Economy Journal Issue 58

MOBILITY
MOBILITY
Zeiss Microscopy
MINERAL SUPPLY
CONSTRAINTS
are LOOMING
The rapid increase in EV sales during the pandemic has tested the resilience of battery supply
chains and Russia’s war in Ukraine further exacerbated the challenge. Prices of raw materials such
as cobalt, lithium and nickel have surged.
BY INTERNATIONAL ENERGY AGENCY*
Unprecedented battery demand and a lack of structural
investment in new supply capacity are key factors. Russia’s
invasion of Ukraine created pressures because Russia supplies
20% of global high purity nickel. Average battery prices fell by 6%
to USD132 per kilowatt-hour in 2021, a slower decline than the 13%
drop the previous year. Given the current oil price environment the
relative competitiveness of EVs remains unaffected.
Today’s battery supply chains are concentrated around China, which
produces three-quarters of all lithium-ion batteries and is home to 70%
of production capacity for cathodes and 85% of production capacity
for anodes (both are key components of batteries). Over half of lithium,
cobalt and graphite processing and refining capacity is in China.
Europe is responsible for over one-quarter of global EV production,
but it is home to very little of the supply chain apart from cobalt
processing at 20%. The US has an even smaller role in the global
EV battery supply chain with only 10% of EV production and 7% of
battery production capacity.
Both Korea and Japan have considerable shares of the supply
chain downstream of raw material processing, particularly in the
highly technical cathode and anode material production. Korea is
responsible for 15% of cathode material production capacity, while
Japan accounts for 14% of cathode and 11% of anode material
production. Korean and Japanese companies are also involved in the
production of other battery components such as separators.
Mining generally takes place in resource-rich countries such as
Australia, Chile and the Democratic Republic of Congo, and is handled
by a few major companies. Governments in Europe and the US have
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bold public sector initiatives to develop domestic battery supply
chains, but most of the supply chain is likely to remain Chinese through
2030. For example, 70% of battery production capacity announced for
the period to 2030 is in China.
Additional investments are needed in the short term, particularly in
mining, where lead times are much longer than for other parts of the
supply chain.
Digital material simulation to map diffusion behaviours in an NMC
lithium-ion battery cathode.
Zeiss Microscopy
The supply of some minerals such as lithium would need to rise
by up to one third by 2030 to match the demand for EV batteries.
For example, demand for lithium – the commodity with the largest
projected demand-supply gap – is projected to increase sixfold to
500 kilotonnes by 2030, requiring the equivalent of 50 new averagesized
mines.
There are other variables affecting demand for minerals. If current
high commodity prices endure, cathode chemistries could shift
towards less mineral-intensive options. For example, the lithium iron
phosphate chemistry does not require nickel nor cobalt but comes
with a lower-energy density and is better suited for shorter- range
EVs. Their share of global EV battery supply has more than doubled
DOWNLOAD REPORT
3D rendering of an intact lithium-ion battery.
*This article is an excerpt from the report GLOBAL EV OUTLOOK 2022 | Securing supplies for an electric future | International Energy Agency | [2022].
THOUGHT [ECO]NOMY
since 2020 because of high mineral prices and technology innovation,
primarily driven by an increasing uptake in China.
Innovation in new chemistries, such as manganese-rich cathodes
or even sodium-ion, could further reduce the pressure on mining.
Recycling can also reduce demand for minerals. Although the impact
between now and 2030 is likely to be small, recycling’s contribution to
moderating mineral demand is critical after 2030.
EV BATTERY SUPPLY CHAIN | Trends, risks and opportunities in a fast-evolving sector | Fitch Solutions
County Risk & Industry Research | [December 2021]
Companies have taken various actions to secure their EV battery supply chains. EV automakers are
investing heavily into the localisation of their supply chains. By offering them a nearby supply of lithiumion
batteries (LiBs), local gigafactories will reduce firms’ dependency on foreign suppliers and the
downside risks ingrained in global supply chains.
greeneconomy/report recycle
This is particularly evident in the midstream as of November 2021, there is a total of 145 EV battery factories
that are either operating or undergoing construction across 28 markets. This includes 51 construction
projects in Europe, totalling 1 230GWh, and 29 in North America at 488.2GWh.
These projects are key enablers in the localisation of EV battery supply chains. Localisation is occurring
upstream with automakers and EV battery manufacturers employing various strategies to develop local
supplies of CRMs near manufacturing sites.
Renewable energy should become a major pull-factor for EV battery manufacturers in the near term.
Battery manufacturing is capital and energy-intensive process – it therefore behoves firms to produce
in markets with abundant access to affordable renewable energy to secure funding (given the growing
importance of ESG in investment decision-making) and to ensure the sustainability of EVs. Consequently,
we the primary pull factor for EV battery manufacturers (outside of government support) will shift from
labour cost/availability to renewable energy cost, availability and sustainability. This is because automakers, and their large commercial
clients, have put in place their own sustainability strategies which will place increased pressure on their component suppliers to become more
sustainable. This will include sourcing ethically produced materials, using renewable energy and reducing carbon footprints along their own
supply chains.
Recycling presents several upside risks to the EV supply chain. By enabling automakers to re-use the CRMs in EV batteries, recycling
offers an affordable, reliable and local supply of CRMs, which tapers automakers’ exposure to supply chain risks and reliance on the mining industry
for regular supplies of expensive metals. Recycling is also an attractive process, particularly to governments and private sector firms, as by diverting
LiBs away from landfills recycling contributes to an organisation’s sustainability efforts.
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