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Will the electric car boom run out of steam before it really kicks off?

EElectric Vehicle (evs) seems overwhelming. Automakers are getting ahead of themselves in terms of production goals. Industry analysts are struggling to keep up. According to Bloombergnef, battery-powered vehicles could grow from less than 10% of global car sales in 2021 to 40% by 2030. Depending on who you ask, this could translate to anywhere between 25m and 40m evs. They, and the tens of millions of people who make them between now and then, will need a lot of batteries. Bernstein estimates that demand from evs will grow ninefold by 2030 (see Figure 1) to reach 3,200 GWh (gwh). Rystad sets it at 4,000gwh.

Predictions like this explain the frenzied activity up and down the battery value chain. Fermentation stretches from the salt flats of Chile’s Atacama Desert, where lithium is mined, to the Hungarian plains, and on Aug. 12, the world’s largest battery maker announced a €7.3 billion ($7.5 billion) investment in its second European “super battery”. factory”. Still, it doesn’t look like the campaign is crazy enough, especially for Western car companies desperate to reduce their reliance on China’s world-leading battery industry amid geopolitical tensions. Prices of battery metals have soared (see Figure 2), and in 2022 battery costs are expected to rise for the first time in more than a decade.

June Bloombergnef cast doubt on its earlier forecast to buy and runev by 2024 will become as cheap as fossil fuel cars. Even more distant goals, such as the EU’s imminent ban on new sales of carbon-burning cars by 2035, may not be achievable. ev Will the boom run out before it starts?

Huge promise On paper, there should be a lot Batteries go everywhere. Consulting firm Benchmark Minerals analysed the plans announced by manufacturers and found that if they materialise, 282 new gigafactories will be commissioned globally by 2031. This will bring the total global capacity to 5,800gwH. It’s also a big “if”. Bernstein calculated the current and committed future supply of six well-known battery manufacturers byd and catl amount China; lg, Samsung and sk Korean innovation; and Japan The Panasonic – adding up to 1,360gwh by the end of the century – an intensive industry is no mean feat. Optimistic overall capacity forecasts mask other problems. Matteo Fini of consultancy s&p Global Mobility points out that gigafactories need to be built Three years, but it will take longer – possibly a few extra years – to reach full capacity. As a result, actual output by 2030 may be insufficient. In addition, manufacturers’ unique technologies and specifications mean that batteries from one factory are often not interchangeable with batteries from another factory, which can create further bottlenecks. The most troublesome thing for Western automakers is China’s dominance in battery manufacturing. The country has nearly 80% of the world’s current battery manufacturing capacity. Benchmark Minerals predicts that China’s share will decline over the next decade or so, but only slightly – just under 70%. By then, the United States will account for only 12% of global capacity, with Europe accounting for most of the rest. Americans absorb ev faster than Slower could ease the tightening of automakers there. Consulting firm Deloitte estimates that of the 31 million ev sold in 2030, the US will account for less than 5 million, compared with 15 million in China, 8 million in Europe. Major U.S. automakers have formed joint ventures with major South Korean battery makers to build domestic gigafactories. In July, Ford and sk Innovation finalized a deal to build one in Tennessee and two in Kentucky, with the automaker investing 66 The South Korean company invested $5.5 billion. In the same month, the Detroit giant reached an agreement to import catl batteries. General Motors and lg Energy are investing more than $7 billion in three battery plants in Michigan, Ohio and Tennessee. European automakers seem to be the most exposed. German giant Volkswagen plans to build six of its own gigafactories by 2030. Some of them, like bmw, are working with Korean companies. Others, including Mercedes-Benz, are investing in European battery manufacturing through a joint venture called acc. Some European startups, such as Sweden’s Northvolt, which is backed by Volkswagen and Volvo, are also busy building capacity. However, the continent’s auto industry still appears to be quite dependent on Chinese manufacturers. Some of these batteries will be produced locally: catl The first investment in Europe, a battery factory in Germany, will start operations by the end of the year. year. However, some packages or their components may still need to be imported from China. Not a comfortable position for a European automaker. The situation could become even smaller if eu introduced a tax based on the total life cycle carbon emissions of a car (including EVs). Peter Carlsson, CEO of Northvolt, believes that proposed EU tariffs on carbon-intensive imports could make The cost of Chinese batteries made with dirty coal increases by 5-8%. That could be roughly the equivalent of an extra $500 per pack. Such a rule would boost his company’s prospects as it uses clean Nordic hydroelectric power. It would also severely limit the ability of European carmakers to source batteries from abroad.

It’s not yours These manufacturing bottlenecks, while severe, appear to be more manageable than the mining end of the battery value chain. Take nickel. The market appears to be well-supplied as Indonesia, which accounts for 37% of global metal production, has seen a surge in production. However, Indonesian nickel is not a high-grade nickel that can be used in batteries. It can be made into battery-compatible materials, but that means smelting them twice, which emits three times as much carbon as refining high-grade ores from places like Canada, New Caledonia or Russia. Commodities trader Trafigura’s Socrates Eknomou points out that these additional emissions defeat the purpose of making ev. Automakers, especially European ones, are likely to steer clear of these things. Cobalt is no longer a point. The price surge in 2018 prompted battery makers to develop and use fewer battery chemistries. A planned mine expansion in the Democratic Republic of Congo (drc), which has the richest cobalt deposits in the world, and Indonesia should also make it easier for battery makers, Until 2027. Things got trickier after that. Getting more may require manufacturers to accept drc artisanal mining, the formalization of which has yet to bear fruit. Until then, many Western automakers said they would not use barge poles to reach an industry where adults and many children work in harsh conditions. Most of the uncertainty is related to lithium. Shortages are forcing manufacturers to get enough metal to cut production. For now, consumer electronics companies are bearing the brunt. But smaller batteries in electronics make up only a fraction of the demand. ev – Manufacturer whose battery pack uses more, probably next.

The lithium market is expected to re-enter surplus by 2026 due to planned new projects. However, most of this is in China and relies on lower-grade deposits that can cost far more to process than hard rock mines in Australia or brine ponds in Latin America. Mr. Economou estimates that lithium carbonate in the form of a ton of usable batteries would need a price of $35,000 per ton to make these projects worthwhile — lower than today’s high price, but three times what it was a year ago. High-end goods from elsewhere cannot be taken for granted. Chile’s new draft constitution, set for referendum in September, proposes to nationalize all natural resources. Changes to Australia’s tax system, which already has some of the highest mining taxes in the world, could hinder new investment in “green” metal production. In late July, the boss of Albemarle, the largest listed lithium producer, warned that despite efforts to free up more supply, automakers faced a fierce battle for the metal until 2030. Because it takes 5 to 25 years to build a mine, there is little time to put a new mine into operation during this decade . Big mining companies are reluctant to get involved in the industry. The head of development at one such company said the green metals market was still too small for mining to be “professional” not worth the trouble. Despite their reputation for doing business in shady places, most don’t have the guts to gamble in countries like drc where contracts are difficult to enforce. Usually start Small miners for venture projects are unable to raise capital in the listed market, and investors are uneasy about the mining industry, which is considered risky and, ironically, unfriendly to the environment. The resulting lack of capital has attracted private equity firms – often founded by former mining executives – and manufacturers with new tastes for vertical integration. lg and catl are among the battery producers supporting mining projects. Since early 2021, automakers have made about 20 investments in battery-grade nickel, with another five in lithium and cobalt. Most of these projects involve Western companies. For example, in March, Volkswagen announced a joint venture with two Chinese mining companies to source nickel and cobalt for its ev plants in China. Last month, GM said it would pay lithium producer Livent a $200 million upfront payment to secure access to the white metal nugget. U.S. ev champion Tesla is signing left and right. Mick Davis, now at Vision Blue Resources, an investment firm that invests in small-scale miners, suspects Whether all these deals are enough to fill the funding gap. Recycling, which typically accounts for a quarter of supply in mature metals markets, is not expected to help much until 2030. Adjustments to battery design may moderate demand for the scarcest metals to some extent, but at the risk of reducing battery performance. Lithium in particular will remain difficult to replace. Technologies that eliminate it entirely, such as sodium-based cathodes, are still a long way off.

Kneading furnace Even if the Western ev industry is Somehow manages to secure enough metal and battery manufacturing capacity, and it will still face a huge problem in the middle of the supply chain, namely China’s near-monopoly on oil refining (see Figure 3). Chinese companies extract nearly 70 percent of the world’s lithium, 84 percent of nickel and 85 percent of cobalt. Trafigura forecasts that the share of the last two of these will remain above 80% for at least the next five years. Like battery makers, Chinese refiners gobble up dirty coal to generate electricity. On top of that, European and North American companies are also expected to rely on foreign suppliers, usually Chinese, for at least half their capacity to convert refined ore into battery material, according to Trafigura.

Western governments say y understand to make supply The urgent need for business diversification. Last year, U.S. President Joe Biden unveiled a blueprint for creating a domestic battery supply chain. The massive infrastructure law he passed in 2021 allocated $3 billion to make batteries in the United States. The Reducing Inflation Act, passed by Congress on Aug. 12, also includes sweeteners for the battery industry, depending in part on mining, refining and manufacturing components in home or allied countries. eu created a group-wide battery consortium in 2017 to coordinate public and private efforts and said it invested in the entire supply chain last year 127 billion euros, with an additional 382 billion euros expected by 2030. Much of this could go downstream, helping Europe and the US become self-sufficient in finished battery production by 2027. That’s stuff. And, enough new deposit discoveries, more efficient mining techniques, improved battery chemistries, and sacrifices in performance are all likely to balance the market. More likely, as commodity consultant Jean-François Lambert puts it, the ev industry “will be Living in a big lie for quite a while”.

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