The International Energy Agency (IEA) predicts that the global demand for lithium will rise 40-fold by 2040 — along with a 20-25 time growth in demand for graphite, cobalt and nickel —as electric vehicles conquer market shares across all major economies. The metal is categorised as a “critical mineral” by the United States Geological Survey (USGS) — along with 49 others — as it is used extensively in making the cathodes for most commercial-grade EV batteries. As the world transitions to clean energy sources like e-mobility and renewable energy, the role of critical minerals in global energy security become all the more critical. It is further complicated by the fact that critical mineral reserves are concentrated in very few geographies on earth.
The “lithium triangle” of Chile, Argentina and the salt flats of Bolivia holds 56% of all known lithium deposits, while 7.9% falls within China. Cobalt is another highly sought-after metal that’s used in EV batteries, and 70% of it is mined by the Democratic Republic of Congo. EV batteries also depend on a combination of several rare earth metals, such as Ruthenium, Chromium and Iridium. However, China at the moment accounts for around 70% of the world’s rare earth minerals supplies, while North Korea is reported to have $10 trillion worth of minerals and two thirds of the world’s rare earths. Yet, due to its political isolation, it may be difficult to bring the deposits to the global supply chain.
The current situation could leave global EV battery customers vulnerable to supply bottlenecks or variations in prices, specially when at the end of 2022, the supply market was dominated by only a handful of manufacturers:
- Contemporary Amperex Technology Co. Limited (CATL, China) - 34% of the global market
- LG Energy (S. Korea) - 14%
- BYD (China) - 12%
- Panasonic (Japan) - 10%
- SK Innovations (S. Korea) - 7%
- Samsung SDI (S. Korea)- 5%
New targets and partnerships
Several nations are thus signing agreements with other geographies to diversify their sources of acquisition. The following have been some important developments since 2022:
- The EU just announced its Critical Raw Materials Regulations : It's a strategy to diversify itself away from its overwhelming dependence on China for EV battery raw materials, and the bloc is exploring partnerships with South America (Chile), several African nations, Australia, and the US. Its target is that by 2030, it aims to have at least:
- 10% of its raw materials mined from within the bloc (it has admitted that its mining sector needs to improve).
- 40% of the processing of such materials within the bloc (to address concerns around human rights and carbon emissions).
- 15% of the materials recycled (which is low, considering its December 2022 Batteries Regulation that sets high targets for EV batteries for 2027-2031).
- Not more than 65% of its annual consumption of the materials come from a single outside source (This may be revised down to a lower percentage once the new partnerships start delivering).
Even so, by virtue of having established factories and offtake agreements with the biggest customers - Tesla, GM, Ford, BMW, Mercedes, Honda, VW, Toyota etc. - they're able to lure investments away from European startups. The bloc is therefore far behind and even with its 2031 goal of establishing 1200 GWh of battery production capacity under the European Battery Alliance, it expects Asian companies (operating from within the bloc) to make up the majority of the suppliers at 44%. 43% is expected to come from European firms and Tesla should make up 13%. Where the EU can lead is in battery recycling. It has some of the best names in the business and it's expected to outperform Asia in recycling EV batteries since the target has been signed into law.
- India eyeing partnerships with the lithium triangle - Chile, Argentina, Bolivia : The Indian government is courting the three nations under KABIL to break away from China's dominance of the EV market. The countries together have about 56% of the world's 89 million tonnes of Lithium. India has also discovered 5.9 million tonnes of its own lithium deposits in J&K. If most of it can be commercially extracted, it would give India the 5th largest deposits.
- India notifies Battery Waste Management Rules, 2022 : Notified last August, the new rule replaces the Batteries (Management and Handling) Rules, 2001 and spells out Extended Producer Responsibility (EPR). Under this, battery manufacturers and importers must collect and recycle all used li-ion batteries (lithium comes under the purview for the first time) or pay penalties under the Polluter Pays principle.
- IIT Madras’s Zinc-air battery as cheaper alternative to lithium : IIT Madras reported last May that its zinc-air battery came in at $150/kWh, compared to ~$151/kWh for li-ion, which means its at par with lithium batteries with a more easily accessible mineral. The price is expected to go down to <$100/kWh if it goes into commercial production. Zinc is widely available in India, the batteries apparently have a longer shelf life and are water-based, which could make them easier to maintain in Indian conditions, specially at battery swapping stations. Calcium-ion is also a fringe technology that may gain more prominence as Lithium's prices rise (7% y-o-y in 2022).
South-east Asian initiatives
Keen to develop their own reserves of lithium, cobalt and rare earths, the following south-east Asian countries (and Japan) are building their own capacities:
- Vietnam and S. Korea have signed a deal to develop Vietnam's immense mineral resources. The country ranks 2nd in rare earth minerals with 22 million tons (China has 44 mt) and S. Korea has the expertise in mining, refining and smelting "core minerals". The deal is part of their work towards carbon neutrality, clean energy and growing their industrial supply chains. They will also develop Vietnam's offshore wind power and invest in aluminium co-firing to lower the latter's dependence on coal power.Vietnam has also signed agreements with Australia (Australian Strategic Mines, ASM) in December 2022 and Blackstone Minerals Ltd. in 2021 and it has had interest from Canada and Japan. Vietnam is the 2nd largest exporter of rare earths to Japan (after China) but the relationship is increasingly more important as Japan looks to wean itself off of China for national energy security. Vietnam could do a lot more on mining the minerals though. Compared to China's 168,000 tonnes in 2020, it only mined 400 tonnes in 2021, down from 700 tonnes in 2020. Also speaking of Canada, Li-Cycle has inked a deal with Vietnam's Vingroup to recycle 95% of the minerals used in EV batteries.
- Cambodia is reported to be rich in gold, copper, silver and molybdenum. Not much to do with rare earths but the first three metals are good conductors and could always find use in electric transport. Molybdenum is used to make high-strength steel alloys, which again is good for automobiles. The country itself is one of the fastest growing in Asia, along with Vietnam and has a vastly underdeveloped stock of mines.
- Indonesia has 21 million tonnes of nickel (per the USGS), despite being the world's largest exporter of thermal coal. Nickel is important for EV batteries and the country is looking to develop its mining sector to play a bigger role in the EV industry. It also signed a deal with Western Australia in February 2023 to have both countries invest and develop each other's critical mineral deposits.
- Taiwan is continuing to produce its high quality semiconductors and be a knowledge partner/equipment provider for e-mobility. TSMC (Taiwan Semiconductor Manufacturing Company Ltd.) manufactures 90% of the world's semiconductors, which are needed for smartphones (with 6G and 7G already in the works), ECUs and GPS systems in cars, solar and wind power, aerospace and defence equipment. A partnership with India is also developing fast as Gogoro, Taiwan's biggest e2W and battery swapping provider, is tying up with India’s Zypp and HeroMotoCorp to fasttrack the country’s last-mile delivery vehicles to e-mobility through access to both state-of-the-art battery swapping.
- Malaysia produces several rare earth products - oxides, chlorides, carbonates and oxalates - through Australia’s Lynas Rare Earths Ltd. that has its facilities in Malaysia. But some of its units were allegedly leaving behind radioactive waste and the Malaysian government has rescinded their license. Yet, the government does acknowledge the importance of rare earths and other companies/processes may be allowed to carry on.
- Japan has one of the best materials science industries and in its bid to move away from China, the country has recently discovered a 2499 sq km sludge patch of rare earths 1850 kms south east of Tokyo, deep in the Pacific. The reserve is being seen as “semi-infinite” but will take lots of money and special engineering to extract commercially. Operations are supposed to start in 2024.
The next few years will thus be a steady transition away from single-source dependence for lithium and cobalt. Research into aluminium-ion and magnesium-ion solid-state batteries is also an exciting avenue as the metals are abundantly available in most geographies. Their commercial production at scale would certainly make them cost-competitive with li-ion, while at the same time contributing towards individual countries’ targets of net-zero emissions and energy independence.