Car manufacturers compete to secure supplies of the so-called ‘white gold’: lithium

Faced with the threat of a possible shortage of lithium for the batteries electric carsautomobile manufacturers compete to ensure the supply of so-called “White gold”in a politically and environmentally tense struggle that ranges from China to Nevada and Chili.

General Motors Co. and the parent company of Chinese company BYD Auto Ltd. went directly to the source and bought stakes in lithium mining companies, a rare step in an industry that relies on outside suppliers for copper and other raw materials. Others are investing in lithium refining or in companies that recycle the silvery-white metal recovered from used batteries.

A shortfall in lithium supplies would hamper plans by governments and industry to ramp up sales to tens of millions of electric vehicles a year, fueling political conflict over resources and complaints about the environmental cost of extract them.

“We already have that risk” of not being able to get enough, confirmed Paul A. Jacobson, GM’s chief financial officer, during a Deutsche Bank conference in mid-June.

“We have to partner with people who can get the lithium for us in the form that we need it,” Jacobson added.

Ford Motor Co. has signed contracts that extend up to 11 years into the future with lithium suppliers on two continents. Volkswagen AG and Honda Motor Co. are trying to reduce their need for freshly mined ore by forming recycling companies.

Global lithium production is on track to triple this decade, but sales of electric SUVs, sports cars and sedans, which rose 55% last year, threaten to exceed that number. Each battery requires about eight kilograms (17 pounds) of lithium, plus cobalt, nickel and other metals.

“There will be a shortage of battery supplies for electric vehicles”admits Joshua Cobb, senior analyst for the automotive industry at BMI Research, a macroeconomic and financial analysis firm that covers different industries and markets.

Adding to the uncertainty, lithium has emerged as another conflict in the tense relations between the United States and China.

Beijing, Washington and other governments view the supply of the metal for electric vehicles as a strategic issue and are tightening controls to ensure access to it. Canada last year ordered three Chinese companies to sell their lithium mining assets for safety reasons.

Other governments, such as Indonesia, Chile and Zimbabwe, are trying to maximize returns on their lithium, cobalt and nickel deposits by requiring miners to invest in refining and processing before they can export.

GM is securing direct access to lithium by investing $650 million in the Canadian developer of a mine in Nevada that is the largest source of the metal in the United States. In return, GM says it will get enough for a million vehicles a year.

Conservationists and Native Americans have asked a federal court to block development of the mine in Nevada, which the Biden administration has adopted as part of its clean power plan. Opponents say it could poison water supplies and soil and contaminate nesting grounds for birds.

“Securing the metals must not result in a sacrifice to the environment”the US group Natural Resources Defense Council said in a report last year.

BYD Auto’s parent company, battery maker BYD Co., has announced more than $5 billion in investment in lithium extraction and refining in the past 18 months.

Most of the sites are in China, but BYD has also promised to put $290 million into a processing plant in Chile, one of the biggest lithium producers. In exchange, BYD can buy lithium from Chilean miners at a discount.

At home, BYD announced last year that it will invest 28.5 billion yuan ($4.2 billion) in a venture to produce 100,000 tons of lithium carbonate a year in the eastern city of Yichun.

Another Chinese automaker, NIO Inc., last year bought 12% of Australian lithium miner Greenwing Resources Ltd. for A$12 million ($8.1 million).

Despite the increased production, the industry could face lithium and cobalt shortages from 2025 if it does not invest enough in production, according to Leonardo Paoli and Timur Gul of the International Energy Agency (IEA).

“Supply-side bottlenecks are becoming a real challenge”Paoli and Gul warned in a report last year.

Automakers may be putting up their own money to reassure miners “notoriously risk averse”, according to Alastair Bedwell of GlobalData, a data analytics and consulting company. He says miners are reluctant to “go all in” on lithium until they are sure the industry won’t switch to batteries made from other metals.

Even if they do, developing lithium sources is a process that takes years.

Mines that came online in the 2010s took on average more than 16 years from discovery to start of production, according to the IEA’s Paoli and Gul.

“These long delivery times raise questions about the ability to redouble supply,” they wrote.

Investment from car manufacturers could “help remove some of the risk from their partners and, in the end, generate more production”, Bedwell opined in an email.

The United States Geological Survey estimates that the world’s lithium resources are about 80 million tons.

Those from Bolivia are the largest, with 21 million tons, followed by Australia with 17 million and Chile with 9 million. China has 4.5 million tons of known reserves and the United States has 1 million.

Annual global production forecasts reach 1.5 million tons by 2030, but demand is expected to rise to 3 million tons if electric vehicle sales continue to rise at double-digit annual rates.

Sales of battery-powered vehicles and gasoline-electric hybrid engines took off in 2021, more than doubling from the previous year to 6.8 million, according to research firm EV Volumes. Sales last year amounted to 10.5 million.

China accounted for 60% of sales last year, with two-thirds of production and three-quarters of battery manufacturing.

Ford plans to sell 2 million electric vehicles a year by 2026. GM, with sales of 3.6 million cars in 2022, plans to develop 30 electric models and a production capacity of 1 million in North America within two years. , in 2025.

Toyota Motor Co.’s annual goal is 3.5 million by 2030. VW, which sold 4.6 million cars worldwide last year, aims for 70 percent of sales in Europe and 50 % in China and the United States will be electric vehicles by 2030.

President Joe Biden last year announced an official goal for half of all new cars sold in the United States to be electric or powered by other zero-emission technologies by 2030.

As sales increase, so does concern from governments, especially in Washington and Beijing, about access to lithium and other minerals and the potential for strategic competition.

Volkswagen’s battery unit, PowerCo, signed an agreement with Canada last August to develop suppliers of “critical raw materials” including lithium, cobalt and nickel.

In a statement, German Chancellor Olaf Scholz praised the cooperation with “close friends” about him “raw material assurance”.

Last year, Canada imposed limits on foreign participation in the production of lithium and other “critical minerals” for batteries and other high-tech products.

The Chinese government has accused the United States, Canada, Japan and other governments of claiming bogus security concerns to hurt Chinese competitors in electric cars, cell phones, clean energy and other emerging technologies.

Other governments are welcoming Chinese investment.

China’s largest lithium producer, Ganfeng Lithium Co., bought Argentine company Lithea Inc. last year for $962 million. In 2021, Ganfeng bought Mexico’s Bacanora Lithium for US$391 million. It develops a project in the Mexican state of Sonora with an expected annual production of 35,000 tons.

Chinese firm Tianqi Lithium Inc. owns 23.8% of Chile’s dominant producer, Sociedad Química y Minera de Chile (SQM).

About two-thirds of the world’s lithium comes from mines. That involves crushing rocks and using acids to extract metals. The process leaves behind toxic mounds of chemical residue.

The rest is extracted from salt lakes or salt flats, called salares in Chile and Bolivia. That can require huge evaporation ponds.

The industry is working on technologies to extract lithium from hot springs, lakes and clay deposits with the least possible environmental impact.

VW has a five-year supply contract with Vulcan Energy Resources Ltd., which plans to produce lithium hydroxide from geothermal brine in Germany’s Rhine Valley.

Vulcan ensures that its process does not use fossil fuels. Thus he responded to complaints that electric vehicles actually do little to reduce overall carbon emissions, because the energy for their manufacture and recharging typically comes from coal, natural gas and oil.

As supplies increase, automakers face another bottleneck: a lack of refining capacity to purify raw lithium into battery material.

Tesla Inc. broke ground last month in Texas on a lithium refinery that Elon Musk, its CEO, said should produce enough for 1 million vehicles a year by 2025.

“The bottleneck is much more in refining capacity than in mining”Musk explained in April, during a conference call with reporters.

Other manufacturers, including BMW AG, which aims to have at least half of its vehicles sold fully electric by 2030, are buying stakes in lithium refineries.

As for GM, “I don’t know” whether it will build its own refinery, Jacobson said.

“Where I can help finance some expansion in exchange for a guaranteed supply, that’s a good thing.”he added. “We have to be open to doing that.”

Smaller brands, which are not assured of their lithium supply, could be constrained, Bedwell warns. He said they may be forced to pay more, which could threaten the existence of some.

“Certainly, mass-market players who don’t set up a good strategy to get lithium will be at a disadvantage.”Bedwell said.

Source: AP