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US Looks to Boost Domestic Production of Crucial Battery Metals
The electric vehicle (EV) transition has passed the point of no return and continues to put upward pressure on the demand for battery metals. While US automakers’ total sales fell in the first quarter, sales of EVs soared.
Compared to the same period a year ago, Tesla and Polestar both reported sharp rises in first quarter sales in the US. Tesla saw its US sales rise 87.2% to 129,743 units in Q1, and it delivered a record 305,000 vehicles around the globe. Meanwhile, Polestar sales climbed an astounding 1,179.7% to 1,510 units as production aggressively ramped up.
Ford’s EV sales rose a record 37.9% in the first quarter, while GM reported minimal EV sales but expects that category to gradually increase as supply chain disruptions subside. Electrek notes that GM received an impressive 65,000 reservations for its electric pickup truck, illustrating the fact that there is no shortage of demand for EVs.
However, as EV production rises, the demand for key battery metals is increasing faster than supplies can currently keep up.
To counter the projected deficits, President Joe Biden recently used the Defense Production Act to add lithium, nickel, graphite, cobalt and manganese to the list of items deemed critical for national defense. Per Bloomberg, the move paves the way for companies aiming to mine these materials to access a $750 million fund administered by the Defense Department.
Mining advocates are hopeful that the move could mark a shift in US industrial policy that shows the Biden administration is committed to furthering their climate agenda and reduce dependence on China.
According to OilPrice.com, the United States currently imports more than half of its annual consumption of 31 of the 35 critical minerals. As of early 2021, the US imported 80% of its rare earth elements from China.
While the recent announcement could spur additional investment into domestic battery metal mining projects, it is far from enough to ensure enough supply of the critical metals to match the level of demand for electric vehicles.
Significant Deficits Loom, Likely to Keep Prices Elevated Until Additional Funding Arrives
Regarding the Biden administration’s move to secure domestic battery metal supplies, National Mining Association President Rich Nolan said “Unless we continue to build on this action and get serious about re-shoring these supply chains and bringing new mines and mineral processing online, we risk feeding the minerals dominance of geopolitical rivals.”
Further, it takes roughly seven to ten years to get a mine up and running in the US, which means production will take a while to progress. And with EV demand expected to continue its upward trajectory, battery metal shortages are projected to persist and keep prices significantly elevated.
Piedmont Lithium CEO Keith Phillips spoke to Kitco last week, saying that his company is experiencing tremendous shortages of lithium chemicals key to the production of EV batteries, which he predicts will last well into the 2030s.
Meanwhile, Japan’s largest nickel smelter Sumitomo Metal Mining expects global demand for nickel used in batteries to rise more than 20% this year on strong demand for EVs, much faster than the company had expected a year ago.
Demand for lithium is also expected to jump 500% by the end of the decade, according to BloombergNEF projections. To match the level of demand, roughly $14 billion of investment is needed to finance lithium resource and refining capacity by 2025.
That projection comes after Adamas Intelligence put out a report in March that showed just how significant the level of demand was in 2021 for battery metals. In the second half of last year, global battery capacity deployed onto roads in newly sold EVs amounted to 177.2 GWh, 92% more than was deployed in 2020.
Looking solely at the three main battery metals, there was a 171% increase in lithium deployed onto roads, while nickel and cobalt came in at a 138% increase and 114% rise, respectively. The increasing rate of EVs hitting the road directly translates to higher demand for these materials.
The lithium market is facing a growing deficit through 2023, while high-grade in nickel required for EV batteries is expected to outstrip supply by 2024. Finding the raw materials necessary to boost EV production is quickly becoming the most severe bottleneck in the industry, keeping prices sky-high.
MRP recently highlighted nickel’s record-breaking price surge on LME exchanges on global fears of rising deficits, and metal prices are yet to return to historical averages.
After soaring more than 250% over a two-day trading period, nickel prices surpassed $48,000 per ton in early March, but have now fallen to roughly $33,300 per ton. For reference, nickel traded at roughly $21,000 per ton at the start of the year and near $11,000 in March 2020.
Lithium carbonate prices have also experienced a meteoric rise over the last year. After trading at roughly 45,000 Chinese yuan per ton to start the 2021 ($7070 USD per ton), costs have skyrocketed to 496,500 yuan per ton ($78,000 USD per ton).
Those prices are likely to remain elevated as even in the most optimistic scenarios laid out by Benchmark Mineral Intelligence, raw materials will fall short of adequate battery supply. The firm found that even when every single raw material project in the pipeline comes on stream and existing operations expand aggressively, there will not be enough raw material for the battery supply chain as the industry enters 2030.
Mining.com notes that the lack of supply is not due to geological constraints, but a lack of capital investment to build out mines. In some cases, automakers may even need to become miners to bring additional capacity to market and secure their own supply chains.
Battery metals will remain in focus as the EV transition continues to accelerate through the decade, and without additional investment into new mining projects, deficits are likely to persist and keep prices remarkably high. |
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