By Mike Stone
Bigger batteries and greater demand for electric vehicles are creating a scramble for raw materials and the supply chains to use them.
As predicted in Energy Storage Report at the beginning of the year, concerns over the scarcity of materials are resulting in attempts by chemical companies, car manufacturers and even at least one nation state to guarantee supplies.
As an example, battery start-up Northvolt has signed a five-year deal with Canada’s Nemaska Lithium to buy 5,000 tonnes of lithium a year, according to the Financial Times.
The battery-grade material is planned for a giant factory in Sweden.
Tesla, meanwhile, has been having discussions with Sociedad Química y Minera de Chile (SQM), Chile’s largest lithium producer (and the world’s second largest), with the aim of securing supplies and reducing unit costs.
Lithium and cobalt
BMW is also reportedly near to signing a 10-year deal for lithium and cobalt from as-yet unnamed suppliers. Meanwhile, Tianqi Lithium is attempting to buy 32% of SQM.
China has warned Chilean regulators not to block the purchase, insisting such a move would jeopardise relations between the two countries.
That the Chinese authorities are taking such a strong stance in the deal underlines the strategic importance of lithium. Despite this interest, there is still some uncertainty as to whether lithium is going to become scarcer or not.
Until recently, scare stories were proliferating about an inexorable rise in the price of the metal thanks to massively increasing demand.
But Morgan Stanley has predicted the bubble might well be about to burst, with prices plunging 45% by 2021 after a tripling over the past few years.
Planned expansion of mining
The main reason for the projected fall is the planned expansion of mining in primary producer Chile, which should add around half a million tonnes to global supply by 2025. But that might not be the whole picture.
Just as Morgan Stanley’s prediction was gaining traction, an article in Mining.com by Rick Mills cast doubts on its conclusions.
“What the (lithium) bears seem to have in common is the belief that a rush of new lithium supply will soon hit the market,” Mills said.
“But what the analysts don’t realise, or maybe for their own reasons neglect to mention, is that a lot of these mines will fail to deliver.”
A disappointingly small increase in supply, coupled with rocketing demand, has led Mills to conclude that lithium price increases will be a continuing trend. It remains to be seen which projections will win out.
Cobalt’s inexorable climb
Turning to cobalt, there seems to be more consensus. Supply of the material is already precarious, as half the world’s current known reserves come from the war-torn Democratic Republic of Congo. And the problems don’t end there.
AsThe Economist pointed out, “four-fifths of the cobalt sulphates and oxides used to make the all-important cathodes for lithium-ion batteries are refined in China.”
Now Chinese battery company GEM is planning to buy one third of the cobalt production from the planet’s biggest producer, Glencore.
The eventual outcome could be that China, which is massively increasing its electric vehicle and battery production, will corner the world’s cobalt market, warned The Economist.
Perhaps seeing the writing on the wall, South Korean battery maker LG Chem has thrown in its lot with China-based Zhejiang Huayou Cobalt, aiming to raise USD$224.8m to build precursor and cathode plants in China.
Controlling the world’s cobalt
In 2017, China produced 80% of the world’s cobalt chemicals, according to Caspar Rawles of Benchmark Mineral Intelligence.
The analyst firm’s figures show that last year 66% of all the cobalt needed for electric vehicles and energy storage batteries was mined in the Democratic Republic of Congo, and 58% of it was refined in China.
These figures suggest that concerns over lithium supplies may be the least of the lithium-ion battery industry’s worries. And the cobalt situation shows little sign of improving.
On Twitter last month, Rawles said: “Announcements like the LG Chem/Huayou joint venture show that Chinese processing dominance is ever increasing.”
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