The transition to the electric car does not only depend on the development of technology and an efficient expansion of the charging infrastructure. Such a profound change in the philosophy of transport generates additional problems that in a few years promise to be a serious problem.
The auto industry has been sent to the front line without armor. Manufacturers must complete a transition to electric car for which they were not prepared, although little by little they are saving the ballot.
However, there are more problems to solve. And they are not easy as long as the industry does not find alternative ways. We refer to the lithium ion batterieswhich have become the key to the success of the electric vehicle industry, but which also threaten to be its grave.
Since January 2020 the price of it has increased by 900%
For the time being, storage technologies that dispense with minerals that are difficult to extract and have limited production, such as lithium, nickel, cobalt or graphite they are far from reaching the market on a large scale.
Therefore, the future of the electric car is in the hands of an unstable market with an uncertain future. Let’s see the causes.
brutal lawsuit
The latest status report Benchmark Mineral Intelligence warns of what is coming to the automotive industry and other sectors dependent on batteries.
And it is that, the prediction speaks of the need to create 384 new graphite, lithium, nickel and cobalt mines between now and 2035 to meet the demand for electric vehicles and energy storage batteries.
Furthermore, if the current potential for recycling raw materials is taken into account, this number only drops to 336. This means that the demand for lithium-ion batteries will have multiplied by 6 in 2032.
lithium demand
Benchmark points out that, with regard to the star mineral, lithium, it will be necessary 74 new lithium mines with an average size of 45,000 tons by 2035. In the case of including the expected volumes of recycled lithium, it would be around 59 mines.
Since mines take at least five years to build, these mines will need to be operational by 2033 to avoid a production stagnation in a sector in which Australia will continue to be the main producer of lithium in this decade.
In China, there are currently more than 13 lithium mines producing lithium-bearing spodumene rock, more than 75% of which is refined in China.
graphite demand
Graphite is essential in batteries as it is the element used for the production of anodes. Currently, there are 70 graphite mines, most of them in China and Africa. And, by 2035, they would need 97 more graphite mines of a production volume of 56,000 tons per year each, without taking recycling into account.
Synthetic graphite, which is mixed with natural graphite to produce anodes, is produced using coke from petroleum needles or coal tar pitch. As a result, it would be necessary to build a total of 54 plants with an average size of 57,000 tons by 2035.
However, if the amount of silicon added to the battery’s anode increases more than Benchmark expects, then the number of new graphite mines needed would be less.
The demand for nickel and cobalt
The report indicates that 72 new mining projects with an average size of 42,500 tons are necessary to meet the demand for batteries. refined nickel.
Without recycling, the world would need to build 62 new cobalt mining projects of 5,000 tons each by the end of 2035. However, recycling will have a greater impact on cobalt extraction. With the anticipated recycled volumes, that number is almost halved, to 38.
Loading tweet…
1566488192437690368
The exorbitant price of lithium
But if the supply of raw materials necessary for the manufacture of batteries is a problem to be faced in the future, the price of said materials is also a problem.
Especially that of lithium, which since reaching record highs in April, has remained stable against all odds. And this is not good since January 2020 the price of it has increased by 900%.
In fact, the next most valuable battery-related material, synthetic graphite, has risen in price by just over 200% in that same period.
In addition, the prices of technical and grade lithium carbonate of China’s battery continue to rise. That contrasts sharply with other battery metals like cobalt and nickel, whose prices have fallen this year.
In these first 9 months of 2022, Chinese lithium carbonate prices for batteries have increased by 90%while lithium hydroxide has increased by 127%.
Brands know that the future is complicated, so they are maneuvering to deal with the situation. Manufacturers like Ford or Stellantis are signing agreements to block supplywhich has increased competition.
Meanwhile, politics begins to come into play with movements such as that of the United States government, which is accelerating demand with the approval of the Inflation Reduction Act. In turn, Mercedes-Benz and Volkswagen have signed agreements with the Canadian government to secure raw materials for batteries.
“Government influence is now in play and we are seeing it in full force in the United States and only the beginning in Canada”says Simon Moores, CEO of Benchmark. “The lithium ion battery is now geopolitical. And if electric vehicles mean lithium-ion batteries, then electric vehicles mean mining.”
Short and medium term forecasts
As Benchmark reports, demand for lithium-ion batteries is on track to grow 36% this year to 610 gigawatt-hours (GW/h). For its part, the supply of lithium will expand by 33%.
Several elements are having an influence on the price of lithium in the short term: the increase in demand for electric vehicles (+34% in June), worst heat wave and drought in SW China in 60 years or the production cuts to deal with the shortage of electricity due to the lack of hydroelectric generation in the Asian country.
All this is directly affecting a ¼ of lithium production in China and sustained high prices for Australia’s spodumene feedstock are also driving the rise. Not surprisingly, prices of spodumene (6% Li2O) have increased by 189% so far this year.
“We hear from the market that converter inventories are low; this is driving carbonate demand and will eventually have a knock-on effect on the hydroxide price,” says Benchmark analyst Daisy Jennings-Gray.
A drop in prices will take time to be noticed in the market
Internationally, lithium hydroxide is still trading at very high levels, around $80,000 per tonne for small spot market volumes in Europe and North America.
Prices used in contracts between lithium miners and buyers are still catching up with Chinese spot market prices as they are renegotiated, and are likely to pass 6 to 12 months before this process ends in full at all contracted prices, according to Benchmark.
In fact, Chilean lithium miner SQM reports that its average lithium sales price was $54,000 per tonne during the second quarter. “Even if the spot market were to drop, contract prices still have some way to go before it is noticed in 2023”says Jennings-Gray.
Benchmark notes that there will be very little room for additional lithium production until 2024. “A shock to the system will push prices down, but the shock will not be significant oversupply from China”says Moores, CEO of Benchmark.
Longer term, the lithium market is likely to break even around 2026, pushing prices to more stable levels, according to Benchmark’s Lithium Forecast.
“High prices are incentivizing accelerated capital spending that will bring forward the schedule of a number of development-stage projects. Nevertheless, the speed of these expansions is struggling to keep pace with growing demand”says Andrew Miller, chief operating officer of Benchmark.
Finally, the supply shortfall is expected to worsen from 2030 as demand grows by another million tonnes of LCE (lithium carbonate equivalent) in a few years. Is the world really ready to complete the transition to electric vehicles?
Photos: Freepik