The Elements of Innovation Discovered
The Elements of Innovation Discovered
A dearth of reliable, affordable energy minerals may lengthen the timeline, increase the costs of global climate ambitions Metal Tech News – May 25, 2022
A shortage of minerals and metals threatens to slow production and drive up the costs of electric vehicles.
The price of lithium, such as that being extracted from brine at the Salinas Grandes salt flat in northern Argentina, has soared 700% since the beginning of 2021.
The International Energy Agency warns that traffic jams threaten the clean energy future. Not on global highways congested with electric vehicles, nor in lines of these EVs waiting to top off their batteries with low-carbon electricity at charging stations. Instead, this gridlock is more likely to happen in automotive and battery factories that cannot find plentiful and affordable supplies of the minerals and metals needed.
"Prices of many minerals and metals that are essential for clean energy technologies have recently soared due to a combination of rising demand, disrupted supply chains and concerns around tightening supply," Tae-Yoon Kim, an energy analyst at IEA, penned in an editorial on critical clean energy minerals.
While every aspect of the low-carbon transition is much more mineral intensive than fossil fuel-powered transportation and energy generation, the electric mobility sector is by far the largest consumer of energy metals due to the sheer volume of vehicles needed to achieve the ultimate goal of replacing the approximately 1 billion fossil fuel burning vehicles currently traversing international highways with zero-emissions models.
"Few areas in the world of clean energy are as dynamic as the electric car market," IEA penned in a May 23 global EV outlook report.
Roughly 6.6 million electric cars, trucks, and SUVs were sold globally during 2021, which made up 10% of total vehicle sales, roughly double the EVs sold in 2020. IEA points out that the average weekly EV sales last year was more than the global total of just 120,000 in 2012. This trend continues to accelerate as all the major automakers are looking to phase out fossil fuel-burning vehicles over the next few years.
Based on current automaker targets, annual EV sales are expected to reach 30 million by 2030 and as high as 82 million by 2040.
These ambitious electrification targets, however, are likely to be quashed by shortages of the raw materials needed to build EVs – especially for battery materials, the rare earths that go into the electric motors, and the extra copper needed for electrified vehicles.
Adding pressure to the supply chains, many of these same metals are needed for wind turbines, EV chargers, and power grids that will need to deliver much more electricity as hundreds of millions of automobiles plugin instead of filling up at gas stations.
Shortages of the minerals and metals needed for the EV revolution, and the price spikes that come along with that, are already being felt by automakers.
"The prices of lithium and cobalt more than doubled in 2021, and those for copper, nickel and aluminium all rose by around 25% to 40%," Kim wrote.
And these sharp rises are continuing into 2022. The price of lithium, for example, has nearly tripled since the start of the year.
The roughly 700% increase in lithium prices since the onset of 2021 has prompted Elon Musk to consider getting into the mining business to ensure plentiful and affordable supplies of this metal critical to Tesla's EV ambitions.
"Price of lithium has gone to insane levels! Tesla might actually have to get into the mining & refining directly at scale, unless costs improve. There is no shortage of the elements, as lithium is almost everywhere on Earth, but pace of extraction/refinement is slow," the Tesla CEO tweeted in April.
Russia's war with Ukraine, and the sanctions associated with that, are further complicating the ability to feed enough metals into the supply chains to keep pace with EV and green energy demand.
According to IEA, Russia produces nearly 20% of the high-grade nickel needed for batteries. It is also the second-largest producer of cobalt and the fourth-largest producer of graphite, both critical to lithium-ion battery production.
Shortly after Russia's invasion of Ukraine, the price of nickel skyrocketed from US$25,000 to more than US$100,000 per metric ton in a single day, prompting the London Metal Exchange to halt nickel trading for more than a week to deal with the aftermath of the largest move in the price of a metal in LME's 145-year history.
While Russian nickel supplies are not dominant enough to directly quadruple the price of the battery and alloy metal in one day, the invasion moved the needle enough to squeeze the enormous short position held by a major Chinese stainless steel company that was betting on a drop in nickel prices.
Although the price for a ton of nickel has settled down to somewhat normal levels, albeit still elevated, after LME trading resumed, the event was a shot across the bow moment for the EV and clean energy sectors that are demanding massive quantities of metals.
Kim said the early March frenzy in nickel prices should also serve as a wake-up call regarding the importance of diversifying global supplies of clean energy metals.
In its "Global EV Outlook 2022" report, IEA points out that demand for lithium – the battery material with the largest projected demand-supply gap – is projected to increase sixfold to 500,000 metric tons by 2030 to build the batteries to store enough intermittent renewable energy and power the EVs needed to meet the climate pledges of global governments. This means that the equivalent of 50 new average-sized mines would need to be developed over the next eight years.
Benchmark Mineral Intelligence, the foremost authority on lithium-ion battery supply chains, estimates that US$42 billion of investment will need to be made in the lithium sector by 2028 to meet the forecast 2030 demand.
Considering the long lead times for permitting and developing a mine, especially in countries with strong environmental standards, global commodity experts agree that the investments in lithium and other clean energy metals projects need to happen quickly to meet the downstream demands.
"Pressure on the supply of critical materials will continue to mount as road transport electrification expands to meet net zero ambitions," IEA wrote. "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."
If the required large mining investments are not made soon enough, a shortage of energy minerals will likely mean that global climate targets will not be met, and the costs of building the low-carbon electric grids and the EVs that plug into them will be higher than hoped.
Even in these nascent stages, rising commodities prices are pushing up clean energy transition costs.
"From batteries to solar panels and wind turbines, the rapid cost reduction trends seen over the past decade mostly reversed in 2021, with prices for wind turbines and solar PV (photovoltaic) modules up by 9% and 16% respectively. Prices for lithium-ion batteries are likely to see a major uptick in 2022," Kim wrote.
The IEA energy analyst, however, believes there are ways manufacturers and governments can help offset some of the clean energy costs being pushed higher by soaring mineral and metals prices.
"Higher commodity prices will not always rule out further cost reductions for clean energy technologies, but only if there is a redoubling of efforts to reduce costs via technology innovation, efficiency improvements and economies of scale," he wrote. "Companies will also have to pay more attention to managing price risks along the value chain. An extension of existing incentive schemes could be considered to avoid consumers turning their back on clean energy technologies."
With more than 16 years of covering mining, Shane is renowned for his insights and and in-depth analysis of mining, mineral exploration and technology metals.
Reader Comments(0)