The Battery Materials Supply Crunch
A chat with Alex Grant + Li, Ni, & Co global supply vs. demand numbers!
We collected some of the key numbers being reported regarding the battery raw materials supply chain. If you enjoy this newsletter, please share and subscribe! For business enquiries, reach out at email@example.com.
📈 The Great Battery Materials Supply Crunch
By now, everyone has seen high projections of the battery demand boom between 2020 and 2030. This is due to falling battery manufacturing costs, global policy for green economic packages, the push for Clean Tech 2.0, and the race to become an international gigafactory powerhouse.
Looking at the projections, global lithium ion-battery demand will grow by a multiple of 17x between 2020 (526 GWh) and 2030 (9.3k GWh), with the majority of demand coming from plug-in hybrid vehicles, electric buses, and commercial vehicles. With a booming battery industry comes booming demand for the battery raw materials.
Every material on Earth is finite
“All of us in the industry have known that there is an abyss coming” - Martin Vydra, president and director of Giga Metals.
While it is promising to see a large global electrification movement, questions remain around the raw material supply chain and discussions around the political, economic, and social impact in the coming decade. A 2020 UN report discusses the inevitable demand for raw materials and strategies to ensure a successful transition to a sustainable 2030. Today, reserves of the raw materials for car batteries are highly concentrated in a few countries and China dominates the battery materials processing supply chain, potentially leading to instability and uncertainty in global supply.
“50% of world cobalt reserves are in the Democratic Republic of the Congo, 58% of lithium reserves are in Chile, 80% of natural graphite reserves are in China, Brazil and Turkey, 75% of manganese reserves are in Australia, Brazil, South Africa and Ukraine.” - UN Report
Economically, supply and demand need to be well-matched to ensure a stable transition to an electrified world. We have seen how disruptive it can be if supply is inconsistent like in the recent global chip shortage case which affected modern car production across all OEMs. The three main materials discussed that can result in a significant bottleneck for the battery industry are cobalt, nickel, and lithium.
Cobalt remains a critical ingredient in high energy cathode materials. Demand will expand with supply deficits expected as early as 2022, growing every year. Today, ~50% of cobalt is sourced from the Democratic Republic of the Congo, a supply chain riled with issues surrounding “big industry” and “artisanal mining” (read: child labour).
While many have tried to guess which chemistry will dominate in the coming decade, the dynamics between material supply, policy, costs, and consumers have meant it is increasingly difficult to make accurate forecasts. A prime example is the unpredicted global move towards LFP (see Tesla and Renault).
The battery industry as a whole has shifted towards low-or-no-cobalt solutions such as high-nickel NMCs (811, 9.5.5) and LFP. This move, however, may be driven by performance and cost requirements rather than sustainability. Policies such as the EU’s “battery passport” should spur more responsible material sourcing. Researchers are also developing high-energy cobalt-free formulations like those from the Manthiram group at UT Austin.
Over the next decade, it is projected that global cobalt demand will exceed 325 kilotons per year, expected to roughly double from 2020. Overall, projections show a 1.5X growth in cobalt supply between 2020 (130 kilotons) and 2030 (180 kilotons), representing a deficit of 149 kilotons.
Nickel has a historic place in battery technology with its origins from NiMH and NiCd technologies and continues to be the main component in cathodes in 2020-30. Nickel is the responsible material for high energy density at relatively lower costs, with newer chemistries like NMC 811 consisting of 80% molar ratio nickel.
In 2019, about 95% of global nickel production is used in the stainless steel and alloying industry, and 5% was for electric vehicle batteries, with much room for growth. For batteries, Class 1 nickel is required coming from sulfide (70%) and limonite ore (30%).
There are sustainability issues around Class 1 nickel production and refining, including sulfur dioxide emissions with smelting, health impacts on local communities, and coal/coke intensive processes. The nickel demand rush has drawn more attention to the industry, and mining companies are putting social responsibility in their processes in order to position themselves as “clean nickel” suppliers for OEMs (McKinsey “clean nickel” report). Certain ways they are doing this include using electrified hauling fleets, renewable power generation, and dry nickel tailings. In 2020, we saw the emergence of the world’s first “carbon neutral nickel mines” and we can expect to see more companies pursue this path.
OEMs are aware of nickel’s environmental issues when they select which suppliers to work with. They are also mindful of the large nickel supply crunch and are working on engineering projects to move away from nickel cathodes.
While there is a current nickel surplus due to the lowered demand from the coronavirus pandemic, demand has bounced back relatively quickly and a supply shortage is expected in the mid-2020s. Demand is expected to be 6x by 2030, while Roskill projects supply to remain similar between 2020 and 2030 due to a lack of expansion and new projects.
Lithium is extracted from 2 main sources: spodumene in Western Australia and brine from Chile, Argentina, and Bolivia. With lithium dominance expected for the foreseeable future, battery demand can only be met by expanding existing output and commissioning new capacity by producers and investors. In a briefing from the White House, they plan to leverage sizeable lithium reserves and manufacturing know-how to expand domestic battery production to establish domestic supply chains.
As the name suggests, lithium is a crucial, irreplaceable, and non-substitutable component in a lithium-ion battery. By 2030, demand for battery-grade lithium hydroxide will reach nearly 1.4m metric tons lithium carbonate equivalent (LCE), while carbonate demand will reach 218k metric tons LCE in 2030, and represents a 5x multiple compared to 2020. On the flip side, lithium supply is only expected to grow by a 3x multiple between 2020 - 2030.
What will happen if raw materials supply can’t keep up with battery demand?
Looking at the global supply and demand projections, demand outpaces supply in every case and the raw materials listed will likely be a major supply bottleneck for long-term energy sustainability and electrification.
One of the direct consequences is that OEMs will pay more as they compete for the ever-limited materials needed for their electric future. In the short term, a lot of supply is guaranteed in supply contracts, but once these end there could be a supply war pushing up the price of cars for the end buyer and pump the brakes on EV mass market adoption by a few years. There is a huge risk around where materials supply is coming from, with potential for countries to become overwhelmingly dependent on main suppliers. Countries are now establishing new supply projects to promote the green agenda while preventing national security risks.
How can we ameliorate a battery materials supply crunch, while ensuring environmental and sustainable processes are adopted by industry?
The looming supply-chain challenges doesn’t mean every battery scientist should trade in their lab coats for shovels, here are some promising strategies being employed:
Fund research into technologies that depend less on critical materials. For example, shifting to low cobalt cathode chemistries and exploring novel lithium extraction methods. We have seen new companies explore these - Breakthrough has funded KoBold Metals using big data to identify new mineral projects and Lilac Solutions for lithium extraction and processing from brine.
Recycling, end-of-life, and reuse technologies will play a core role in ameliorating a raw material crunch. In the past year, we have seen promising technology developments and business cases pushing battery recycling plants like Li-Cycle, Hydro, and Redwood Materials.
Invest in domestic mining to reduce dependency and strengthen diversity and security of supply. The White House released a briefing to secure American supply chains and become a leader in the battery world. We have also seen companies like Tesla investing in their own lithium mines in Nevada.
Implement regulations on mining processes across the battery supply chain. It is critical to grow supply chains towards an electrified future responsibly. New industry legislation should be established for materials mining to ensure we do not grow the battery industry at a huge environmental and social cost.
👨🔬 BATTERY CHATS
Alex Grant, Principal at Jade Cove Partners
We chatted with Alexander “Big Lithium” Grant who is involved in all things lithium supply chain, battery mineral extraction, and environmental impact modeling. Alex is Principal at Jade Cove Partners and listed in the 2021 Forbes Energy 30 Under 30. He is a partner at Minviro Life Cycle Assessment, and advises lithium brinefield services in Argentina, Bolivia, and Chile with Zelandez. Alex is also a co-founder of Lilac Solutions, a Silicon Valley lithium extraction technology company funded by Bill Gates’s Breakthrough Energy Ventures.
Read more about Alex Grant and Jade Cove Partners.
🌞 THANKS FOR READING!
About the writers: Andrew is an engineering science PhD student at the University of Oxford (@ndrewwang). Nicholas is a business manager at UCL Business and Venture Fellow with Berkeley SkyDeck (@nicholasyiu).