The US is a bystander in the global race for the battery metals supply chains

[Guillaume Albasini + 851]

An interesting wake up call from Simon Moores, Benchmark Minerals’ Managing Director, in his opening testimony to the US Senate Committee on Energy and Natural Resources on 5 February 2019 :

 

“We are in the midst of a global battery arms race, in which so far the US is a bystander. The advent of electric vehicles and energy storage has sparked a wave of battery megafactories that are being built around the world.

“Since my last testimony only 14 months ago we have gone from 17 lithium ion battery megafactories to 70. In gigawatt hour-terms we have gone from 289 GWh to 1,549 GWh, that’s the equivalent of 22 million pure electric vehicles worth of battery capacity in the pipeline.

“The scale and speed of this growth is unprecedented and it will have a profound impact on the raw materials that fuel these battery plants. The scale of investment will also drive the cost of lithium ion battery production down below $100 kWh this year. This adds extra impetus to this mega-trend of battery megafactories and the impact on the demand for critical battery raw materials of lithium, cobalt, nickel and graphite, has been unprecedented.

“For example, in the next decade the demand for lithium [used in the battery industry] is set to go up 9-times, cobalt is set to go up 6-times, nickel is set to go up 5 times, and graphite anode is set to go up 9 times.

“The question is how much of this mineral to EV battery supply chain does the US control? The way I view the battery supply chain is in three main elements: you’ve got the mine where the minerals come from, you’ve got the chemical refining aspect which is absolutely key to using those chemicals or minerals in the batteries, and you’ve got the battery plants.

“For stage one, how much of that mined supply does the US control? For nickel it’s zero, for cobalt it’s zero, for graphite it’s zero, and for lithium it’s one percent.

“For the chemical stage, where the know how comes in for using these minerals in batteries, how much capacity does the US control? Nickel it’s zero percent, cobalt it’s zero percent, graphite it’s zero percent, and for lithium it’s 7%.

“The battery capacity stage, where they make the actual batteries, the consuming plants: in 2018 the US had 9%, that was mainly from the Tesla Gigafactory in Nevada and by 2028 we’re only forecasting 10%. We’re forecasting a relative flatline as this industry grows.

“Incidentally, China is on track to have 65% of battery capacity by 2028. It already has 51% of lithium chemical capacity, 80% of cobalt chemical capacity, 100% per cent of graphite anode capacity and a third of nickel chemical capacity.

“Those that control these supply chains will hold the balance of industrial power for the 21^st century auto and energy industries. And the question I have for this committee is what role does the US want to have in this global energy storage revolution? Because it starts with these supply chains.

https://www.benchmarkminerals.com/benchmarks-minerals-simon-moores-warns-senate-us-a-bystander-in-battery-raw-materials/

 

[TomTom + 183]

He's right, but Trump actually made a couple of these metals 'critical to the national economy and national security' 
https://www.prnewswire.com/news-releases/trumps-recent-executive-order-could-boost-lithium-supply-in-the-us-668588733.html

[ronwagn + 6,290]

On 3/30/2019 at 6:41 PM, mthebold said:

The situation may not be as bad as these numbers suggest.  The US currently doesn't mine much (thanks to decades of neglecting - if not actively attacking - our industry), but I believe there are projects planned. Planned projects aside, there's also the Gigafactory.  Musk envisioned the Gigafactory drawing suppliers to the region, ultimately creating an industrial base.  That hasn't yet happened - but it might. 

The main problem is risk: Tesla is a young company with an uncertain future.  IIRC, Tesla's bankruptcy risk was so bad the Model S had to be designed around the few suppliers willing to work with them.  Tesla's situation has improved somewhat, but it's still at significant risk of bankruptcy.  Companies supplying low-cost commodities won't invest in mines that only make sense if Tesla's Gigafactory exists.  However, if Tesla survives introduction of the Model Y, Semi, and Pickup, achieves consistent profitability, and holds its own against serious competitors, it will have proven itself.  At that point, the industrial base Musk envisioned will probably appear. 

Finally, absence of evidence is not evidence of absence.  Politicians and state corporations need grandiose gestures to maintain public support; corporations need secrecy to maintain a competitive advantage (and avoid attracting public interference).  It wouldn't surprise me to learn that US corporations are quietly making progress while foreign entities broadcast their intentions. 

Sounds logical to me. I am not going to start researching where all the potential mines could be but there is an abundance of lithium in California. So much, in fact, that some birds develop misshapen beaks according to one report I have read.

https://www.valuewalk.com/2016/04/short-lithium-vs-long-copper/

Edited April 6, 2019 by ronwagn
reference

[John Foote + 1,135]

Worry more about rare earth metals for magnets. Lithium is mined in a lot of places. You options in rare earth magnets are China, China, and more China. They high end reduction/sintering is in Japan. 

[BenFranklin'sSpectacles + 762]

20 hours ago, John Foote said:

Worry more about rare earth metals for magnets. Lithium is mined in a lot of places. You options in rare earth magnets are China, China, and more China. They high end reduction/sintering is in Japan.  

Is that where all the rare earths are located, or simply where they're currently mined?  IIRC, the US and Europe were major producers of all metals before China undercut prices. 

Metal prices are increasing.  How much must prices increase before China loses its monopoly?  How many years would it take to revive old mines and start new ones?  My guess is that, with newfound government support, the developed world could achieve mineral independence in a decade.  If relations between the US and China deteriorated, I suspect this could happen in a couple years.  With interest rates fixed and low, money is no object.  The main question is political will to make it happen. 

[Peter Svoboda + 2]

On 3/29/2019 at 12:12 AM, Guillaume Albasini said:

An interesting wake up call from Simon Moores, Benchmark Minerals’ Managing Director, in his opening testimony to the US Senate Committee on Energy and Natural Resources on 5 February 2019 :

 

“We are in the midst of a global battery arms race, in which so far the US is a bystander. The advent of electric vehicles and energy storage has sparked a wave of battery megafactories that are being built around the world.

“Since my last testimony only 14 months ago we have gone from 17 lithium ion battery megafactories to 70. In gigawatt hour-terms we have gone from 289 GWh to 1,549 GWh, that’s the equivalent of 22 million pure electric vehicles worth of battery capacity in the pipeline.

“The scale and speed of this growth is unprecedented and it will have a profound impact on the raw materials that fuel these battery plants. The scale of investment will also drive the cost of lithium ion battery production down below $100 kWh this year. This adds extra impetus to this mega-trend of battery megafactories and the impact on the demand for critical battery raw materials of lithium, cobalt, nickel and graphite, has been unprecedented.

“For example, in the next decade the demand for lithium [used in the battery industry] is set to go up 9-times, cobalt is set to go up 6-times, nickel is set to go up 5 times, and graphite anode is set to go up 9 times.

“The question is how much of this mineral to EV battery supply chain does the US control? The way I view the battery supply chain is in three main elements: you’ve got the mine where the minerals come from, you’ve got the chemical refining aspect which is absolutely key to using those chemicals or minerals in the batteries, and you’ve got the battery plants.

“For stage one, how much of that mined supply does the US control? For nickel it’s zero, for cobalt it’s zero, for graphite it’s zero, and for lithium it’s one percent.

“For the chemical stage, where the know how comes in for using these minerals in batteries, how much capacity does the US control? Nickel it’s zero percent, cobalt it’s zero percent, graphite it’s zero percent, and for lithium it’s 7%.

“The battery capacity stage, where they make the actual batteries, the consuming plants: in 2018 the US had 9%, that was mainly from the Tesla Gigafactory in Nevada and by 2028 we’re only forecasting 10%. We’re forecasting a relative flatline as this industry grows.

“Incidentally, China is on track to have 65% of battery capacity by 2028. It already has 51% of lithium chemical capacity, 80% of cobalt chemical capacity, 100% per cent of graphite anode capacity and a third of nickel chemical capacity.

“Those that control these supply chains will hold the balance of industrial power for the 21^st century auto and energy industries. And the question I have for this committee is what role does the US want to have in this global energy storage revolution? Because it starts with these supply chains.

https://www.benchmarkminerals.com/benchmarks-minerals-simon-moores-warns-senate-us-a-bystander-in-battery-raw-materials/

 

Really liked this article. What's interesting is aside from the economic benefits China and other nations derive from the actual mining is the geopolitical influence they gain in crucial countries like the DRC and others. Why do you suppose the US has been content to allow China to essentially monopolize precious metals like cobalt which are so crucial to US national security, as well as dramatically increase influence in key strategic nations such as the DRC where a majority of the world's cobalt is? 

 

On top of that, how long will it take for the US to play catch up in this?

[Guillaume Albasini + 851]

3 hours ago, Peter Svoboda said:

Really liked this article. What's interesting is aside from the economic benefits China and other nations derive from the actual mining is the geopolitical influence they gain in crucial countries like the DRC and others. Why do you suppose the US has been content to allow China to essentially monopolize precious metals like cobalt which are so crucial to US national security, as well as dramatically increase influence in key strategic nations such as the DRC where a majority of the world's cobalt is? 

 

On top of that, how long will it take for the US to play catch up in this?

Compared to the Chinese, the US lacks the long term strategic vision and planning. US companies are too focused on the next quarterly report while the Chinese are planning 10 or 20 years ahead.

China has been patiently ramping up it's control on all the segments of the value chain : cobalt, mines, metal reffineries, batteries producers,  and EV cars.

Now the Europeans are awakening and trying to catch up but they are way behind. And in the US they are still asleep. They think they are the leaders because they have Tesla but behind Tesla the landscape is pretty empty.

Two thirds of the cobalt production comes from the DRC. The main cobalt producer in the DRC is Glencore, a Swiss based company.  In 2018, Glencore signed an agreement to sell 52,800t of cobalt hydroxide to Chinese chemicals firm GEM over three years. This represents around a third of Glencore’s total planned production during this time. And among the top 10 cobalt producers in the DRC there are 7 Chinese mining companies as shomn in this chart (Chinese companies are those with a purple circle)

 

And most of the cobalt extracted in the DRC is exported to Chinese metal reffineries.To date, China has control of around 85% of global cobalt supply, according to Darton Commodities.

Last week I was interviewed by l'Echo, a belgian business newspaper, on cobalt and I said the DRC was to cobalt what Saudi Arabia is to oil, but with a much larger market share.

Read the article (in French) here : https://www.lecho.be/entreprises/industries-de-base/le-cobalt-petrole-maudit-du-21e-siecle/10121466.html

The Chinese involvement in the DRC is a kind of answer to the US influence in Saudi Arabia. They could say "You control the energy value chain of the XXth century but we control the energy value chain of the XXIst century.

For China, the shift from ICE cars to EV cars is a strategic move to get out of the US dominated oil value chain and replace it by a Chinese dominated value chain.

 

 

 

 

[Peter Svoboda + 2]

That was very informative, thank you. 

 

So then where does the US go from here? We quietly sit on our hands and allow precious metals to essentially be monopolized by not just a foreign country, but an adversary? 

[Guillaume Albasini + 851]

Bloomberg reports today in an article that " The raw materials gap will be discussed at a May 2 meeting in Washington expected to draw government officials, carmakers, mining companies and consultants on the need for streamlining the U.S. permit process for new lithium projects and stockpiling purchases."

But it's not clear if cobalt will be addressed too.

https://www.bloomberg.com/news/articles/2019-04-29/u-s-lags-china-expands-in-race-for-electric-vehicle-dominance?srnd=hyperdrive