Geopolitical turbulence and the fragile and volatile nature of the critical raw-material supply chain could curtail planned expansion in battery production—slowing mainstream electric-vehicle (EV) adoption and the transition to an electrified future.
Soaring prices of critical battery metals, particularly lithium and cobalt, are threatening supplier and OEM profit margins. This situation has quickly translated into increased component and vehicle prices, according to new analysis from S&P Global Mobility Auto Supply Chain & Technology Group.
Trade friction and ESG concerns are also affecting the development of the raw materials supply chain between markets. These collective developments add to the challenges of the electric vehicle transition.
The access to cobalt is of particular concern, according to the report. “Cobalt is a material well understood for its limited sources of origin and concerns regarding ethical supply,” says the report. Battery-grade cobalt currently originates from just 18 mines, totalling 52,000 metric tonnes—of which 29,000 is forecast to be mined in the Democratic Republic of Congo (DRC) in 2022. The report notes that “The United Nations has cited the DRC’s “deteriorating security situation,” its humanitarian crisis affecting 27 million people, as well as child-labour practices and the ongoing guerrilla campaign being waged over the exploitation of resources and food security.”
For elements such as lithium, nickel, the development chain is lengthy and complex, from their difficulty to extract to their complicated refining. According to the report, “The intermediate steps between excavation and final assembly are a particular choke point in terms of expertise and market presence. Currently, China is the clear leader in materials refining, as well as the packaging and assembly of battery cells. At issue is which other nations will step up to facilitate this industry transformation.”
“We have identified a total of 28 extraction sources of battery-grade nickel over the coming 12 years to serve the light passenger-vehicle market, located in 15 countries worldwide,” said Dr Richard Kim, Associate Director with S&P Global Mobility’s Supply Chain & technology team. “However, the supply base for the upstream material processing steps and formation of the fundamental battery cell cathode chemistries presents a challenging lack of geographic diversity.”
Despite the conflicts ravaging the DRC, S&P Global Commodity Insights still estimates that the nation’s output, bound for OEMs and suppliers, will increase to 37,000 mT by 2030. “However, reliance on the DRC will decrease from 56 per cent to 17 per cent in terms of total tonnage. We expect near tenfold increases in supply from countries such as Australia and Indonesia, while countries such as Vietnam, Finland, and Morocco will by then weigh in with meaningful contributions.”
“Geopolitics has coupled with a desire for supply chain dominance and independence in the battery raw material supply chain evolution to date,” said Dr Kim. “China has established a firm head start. The evolution of their Belt and Road initiative clearly had one eye on the automotive industry transition to electrification, with broad strategic and logistical investments in Africa as well as Southeast Asia.”
S&P Global Mobility research clearly indicates that established battery raw material supply and processing operations under mainland Chinese ownership will continue to deliver much of the world’s supply of lithium-ion batteries and their constituent key elements.
“The battery will be the defining technological and supply chain battleground for the industry in the next decade, and access to their constituent raw materials will be crucial,” says the report.