The demand for electric vehicles is skyrocketing. Can the supply of lithium and other critical minerals for batteries keep up?
From the deep sea to the DRC, countries and companies are scrambling to secure increasingly scarce minerals to meet urgent climate goals.
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If the world wants to replace all its gas-burning cars and trucks with cleaner electric vehicles, it will have to dig up rocks. A lot of rocks.
Demand for EVs is soaring in many parts of the globe, and a wave of domestic policies will send it skyrocketing in the U.S. soon. The batteries that power all those EVs need minerals — cobalt, nickel, graphite and, in particular, lithium — and the race is now on to mine and process enough of them. Complicating the picture, the minerals needed to fuel the EV boom are also increasingly in demand for energy storage and other clean energy technology. Just as fossil fuels have powered the global economy for the past 150 years, these minerals will be the crux of the energy future.
“We’re in a [lithium] supply deficit as we speak, from the global perspective,” said Andrew Miller, CEO of Benchmark Mineral Intelligence, a consulting firm. “The demand projections are growing a lot quicker than the potential to bring on new supplies.”
Globally, consumers bought 6.6 million plug-in vehicles in 2021, a number projected to triple by 2025. That could lead to 469 million passenger electric vehicles on the road by 2035, according to one projection from BloombergNEF — or 612 million if the world gets on track toward net-zero emissions by midcentury. In the U.S., the Biden administration has set a goal of making half of all new car sales EVs by 2030 — and new legislation like the Inflation Reduction Act and California’s 2035 ban on gas-powered vehicles is putting muscle behind that goal.
The International Energy Agency projects a thirteenfold increase in demand for lithium between 2020 and 2040, based on policies in place in May 2021 — and that’s even if the world isn’t doing so well on climate targets. In a “sustainable development scenario” where the world is on track to meet the climate change goals of the Paris Agreement, lithium will see a 42-fold increase in demand. Other crucial minerals, including graphite, cobalt and nickel, will also see demand jump by a factor of around 20.
Lithium is currently mined in a relatively limited number of countries, with supply dominated by Australia, Chile and only a few others. The U.S., where recent legislation requires that EV batteries increasingly be sourced domestically or from certain trade partners, has very limited lithium mining in operation and permitting rules that may slow efforts to bring more online.
Meanwhile, the world’s second-largest economy is far and away the EV battery and lithium behemoth: Chinese companies dominate the battery supply chain, particularly at the refining and manufacturing stages. That’s a big challenge for the U.S. as it tries to bring the supply chain closer to its shores.
Other minerals are mined in varying locations across the world, often in countries with limited environmental oversight or the potential for significant geopolitical strife. And some seemingly far-out and controversial ideas are coming closer to fruition, such as mining cobalt, nickel and copper from millions of small rocks deep under the Pacific Ocean.
“In order to meet the demands of the Western automotive market, you’re going to need — it can’t all just be coming from one country — you’re going to need a diverse set of suppliers,” Miller said.
This summer, analyses showed the U.S. had passed the 5 percent mark for EVs among new car sales, joining China and Europe — considered a tipping point for the technology, after which mass adoption of EVs will theoretically take over. This would be a crucial steppingstone for climate action, driving down emissions from the sector that, in the U.S., remains the largest source of CO2 and globally accounts for more than 15 percent of all emissions. The question is: Can we get enough of those rocks out of the ground to keep up? Or will a limited minerals supply make EVs scarcer and more expensive than the public, and the climate, demands?
Global Supply Lens
Diversifying lithium sources
Australia, Chile and China collectively account for more than 85 percent of all the lithium mining in the world; adding Argentina and other Latin American countries brings that to 98 percent. This isn’t necessarily because of limited availability, though.
“Lithium isn’t geologically scarce,” Miller said. “It is not about the geological availability of lithium, but the ability of the industry to extract it.”
The industry is trying to catch up. According to an analysis from McKinsey, global production jumped up 32 percent to 0.54 million tons in 2021 — but 2030 demand will run upwards of 3 million tons. With the demand spiking and lithium prices soaring over the past year, announcements of new planned mines or expansions to existing mines have started pouring in.
Snow Lake Resources Ltd. in Canada announced plans earlier this year for a renewable energy-powered lithium mine in Manitoba, Canada — though actual production is likely two years out or more. In Australia, two companies announced plans to spend upwards of $500 million on developing lithium mines in the western part of the country; the Kathleen Valley mine, according to Liontown Resources, will be among the world’s largest, producing half a million tons annually starting in 2024.
But bringing new mines online can take years — years the world doesn’t really have in the context of climate change. “If you look historically in the lithium market, you’re looking in the region of seven to 10 years to really develop a greenfield lithium asset,” Miller said. “That’s your typical timeline.”
And in some places, a complicated geopolitical landscape makes it difficult to project future supply. On Sept. 4, citizens of Chile, home to the world’s largest existing lithium deposit, voted down a new progressive constitution that would likely have made mining more costly by strengthening environmental protections and centering the rights of Indigenous people. The defeat sent the government back to the drawing board and drew cheers from the mining industry.
Plans to expand mining in various other places such as sub-Saharan Africa could easily run into such unpredictable roadblocks. In the Democratic Republic of Congo, where the bulk of the world’s cobalt comes from, the country’s leadership has pushed back against several Chinese mining projects in recent years, saying that the deals were unfair and should be renegotiated. Other minerals beyond lithium are concentrated in countries ranging from Brazil and Cuba to the Philippines and Indonesia — each with their own challenges from human rights violations to biodiversity loss. And then there’s the ocean floor.
The Metals Company, a mining venture based in Vancouver, has secured access to an enormous piece of the seabed in an area of the Pacific between Hawaii and Mexico known as the Clarion-Clipperton Zone. They say the nodules of rock they aim to mine contain enough nickel, copper, manganese and cobalt for an astonishing 280 million EVs. But not everyone is happy with the idea.
A broad collection of nonprofits, banks, governments and even car companies have joined calls for a moratorium on deep sea mining, with concerns that one of the last pristine ecosystems on the planet could be irreversibly disturbed. “We have to create the legal framework to stop high seas mining and not to allow new activities that endanger ecosystems,” said French President Emmanuel Macron earlier this summer. Nevertheless, the International Seabed Authority, the obscure United Nations body responsible for governing the mining in question, has granted the Metals Company permission to begin a pilot mining project.
There are of course environmental concerns with surface mining of those minerals, and lithium as well. Yet the conversation has a different tenor than with previous mining booms thanks to the existential need to combat the mother of all environmental issues, climate change.
“If you don’t turn over dirt to get lithium out of the ground, you’re probably turning over dirt to get natural gas, or oil, or uranium,” said Ian Lange, an associate professor of economics and business at the Colorado School of Mines. “Nothing is puppy dogs and ice cream, right? Everything has upsides and downsides.”
One country has understood the need to “turn over dirt” in the name of the clean energy transition — and reaping the riches of the future economy — more than most: China.
How Chinese companies came to dominate the battery supply chain
When looking at the global map of lithium mines, China doesn’t immediately stand out. It produces less than 10 percent of global lithium. But for years now, China has been leading the world’s electric car boom — it is projected to sell a whopping 6 million EVs this year. That means Chinese companies need an ever-growing share of the sought-after minerals, so they’ve ventured far from home looking for them.
China’s lithium giants have emerged as some of the biggest names in the recent global shopping spree for mines. Tianqi Lithium owns 25 percent of one of Chile’s two largest mining companies, SQM. Ganfeng Lithium, the world’s largest lithium metal producer, holds a 50 percent stake in Mt Marion, a massive mine in Western Australia where it currently sources its lithium. And Ganfeng Lithium has its eyes on the future — it has investments in mining projects under development in countries including Ireland, Argentina, Mexico and Mali. Ganfeng Lithium is also a battery maker itself, so controlling these resources gives it supply chain security. Other Chinese battery titans like CATL have also gone directly to the source, buying foreign lithium mines to shore up their supplies.
The story is similar for other important battery minerals. China mines very little of the world’s cobalt, but Chinese companies own or have a stake in 15 of the 19 cobalt mines in the Democratic Republic of Congo, according to a New York Times investigation. In the case of nickel, Chinese companies have aggressively invested in Indonesia, which is the world’s top producer of the metal. Domestically, China only dominates the global mining of one key battery mineral: graphite.
Chinese companies got a head start in the global scramble for these minerals in part because the Chinese government made a strategic choice to develop the domestic electric vehicle industry more than a decade ago. With generous subsidies boosting electric vehicle sales, Chinese companies were able to make bold investments accordingly. Chinese state-owned banks have also helped finance mining projects, from Qinghai province to the Democratic Republic of Congo. “The demand signal has been quite clear,” said Jane Nakano, a senior fellow in the energy security and climate change program at the Center for Strategic and International Studies.
The booming EV business has also helped Chinese companies become the world leaders at the next level of the supply chain: refining. This is the critical step that converts the mineral into chemicals that can be used to make batteries. Upward of 60 percent of the world’s lithium, nickel, cobalt and graphite are processed in China.
It is perhaps unsurprising, then, that Chinese companies produce the vast majority of the world’s lithium-ion batteries.
Miller said China’s approach is now seen as one to emulate. “What we’ve certainly said in our conversations with policymakers in the U.S. and the other parts of the world is that you can actually look at what China has done as quite a strong template for the rest of the industry.” He added, “What it has done very well is positioning itself strategically, either owning assets directly or working in joint ventures, to dictate the flow of those lithium units when they are taken out of the ground, which means they’re being refined in China. So it directs the trade flow to China.”
U.S. Policy Lens
Clawing back into the lithium game
The fact that Chinese companies tower over the supply chain for some of the commodities most central to the future economy and global efforts to fight climate change has caught the attention of policymakers in Washington.
The pandemic has proved that depending on one source for any material has risks, and for some in the U.S., depending on China appears particularly risky. Under the most extreme scenarios, such as conflict with China over Taiwan, the U.S. could lose access to China’s big mineral refiners. Even under less dire straits, China could weaponize its control over the mineral supply chain in a trade war.
In response to this fear, and its own interest in getting the maximum economic reward from the clean energy transition, the U.S. has recently planted a flag in its own trailing lithium and minerals industry. The landmark Inflation Reduction Act, signed into law by President Joe Biden in mid-August, contains several provisions aimed at bolstering the entire supply chain for EVs. The most notable include a requirement that 40 percent of EV battery materials must be sourced from North America or certain U.S. trade partners starting in 2023, and at least half of a battery’s components must be manufactured domestically in order to qualify for tax credits. By 2024, batteries must also be made without parts from China and other “foreign entities of concern,” including Russia.
Experts have warned that these provisions will be hugely challenging to meet given the current minerals landscape. “The U.S. is way behind, so we need to stimulate [production] and catch up,” said Henry Sanderson, executive editor at Benchmark Mineral Intelligence. “But I think the problem is that we’ve let ourselves get so far behind that trying to cut China out is now an impossibility in the near term, to decarbonize and meet the demand,” he said.
Only one-fifth of EV models will be eligible for the full tax credit, and the Made in America requirements will only be ratcheted up over the coming years under the law. If very few vehicles qualify for the EV tax credits, that will mean consumers have to pay a higher price for EVs, which will make conventional cars look more attractive for longer. “It’s suboptimal from the climate perspective,” Nakano said.
A number of car companies have responded to these steep requirements, as well as California’s recent legislation to ban sales of gas-powered vehicles by 2035, announcing big plans to invest further in U.S. EV and battery manufacturing facilities. Mining companies are responding, too.
“When we look at what we were asking for four months ago, much of it has really been delivered” by the Inflation Reduction Act’s passage, said Ellen Lenny-Pessagno, the global vice president for government and community affairs at Albemarle, a large lithium producer that operates the only active mine in the U.S., the Silver Peak mine in northwestern Nevada. “The Inflation Reduction Act is asking for very quick, short timelines. And so permitting is going to be critical for that. … The demand will continue to be very high — but the sooner that we can begin meeting these requirements, the better,” she said.
Albemarle is planning to double production at Silver Peak, and it is working on feasibility assessments at another site in North Carolina known as Kings Mountain, where lithium was previously extracted decades ago and resources remain abundant. The company is also planning a large lithium processing facility located in the southeastern U.S. to manage the Kings Mountain output — but it estimates the mine might only start producing by 2027, if not later.
Other companies are trying to get a foot in the American door. The Biden administration has approved a huge open-pit mine at Thacker Pass in Nevada to be built by Canadian company Lithium Americas, but local opposition has left its fate up in the air.
“There’s a lot of really solid lithium assets within the U.S. that are under development. The issue is the timeline to bring those to production is several years — best case,” said Miller of Benchmark. “There are some serious question marks about, you know, whether you can really move the needle by as early as 2024, 2025. It’s going to be incredibly difficult. The U.S. won’t be able to be self-sufficient in lithium for a long time to come.”
Lenny-Pessagno said streamlining the permitting process in the U.S. is now the clearest path to increased production. Democratic Sen. Joe Manchin of West Virginia tried this month to attach a permitting reform bill that would include mining operations to government funding legislation, but Republicans and some Democrats teamed up to tank its progress; it is unclear if such legislation will be revived in the coming months. Speeding up permitting would come with likely increased environmental risks in the short term, even while potentially helping with the longer-term climate goals — an endlessly difficult balance to strike.
“The permitting system is basically difficult, we’ll say, or uncertain,” said Lange. “That weighs on a lot of firms’ investment decisions or a lot of investors’ decisions. ... These kinds of things just make people say, ‘You know what? Canada’s happy to have us. Australia is happy to have us.’”
Car companies’ plan for the mineral-heavy future
With an uncertain future for minerals mining from the mountains of North Carolina to the bottom of the Pacific, battery and car manufacturers are navigating a difficult path. Tesla sources lithium for its batteries from several companies, including Albemarle and Ganfeng, and contracts with various Chinese, Canadian and Australian firms for cobalt and nickel. Though shortages of lithium and other minerals loom, the company’s annual report to the Securities and Exchange Commission said, “We currently believe that we have adequate access to raw materials supplies in order to meet the needs of our operations.”
Likely worried about the potential for bottlenecks and shortages, other car companies are starting to get in the game.
Ford announced a deal this summer to procure 150,000 tonnes of lithium from Liontown Resources’ Kathleen Valley mine near Perth, Australia. General Motors has a deal in place with another Australian company, Controlled Thermal Resources, which wants to develop a lithium production project at California’s Salton Sea — where no such lithium extraction yet exists.
Some experts are optimistic that technological advances will also act as a shield against potential mineral shortages. “Materials substitution is a thing,” Lange said. “We have a bottleneck around nickel? Guess what, there are some material substitution possibilities — people will figure out new things.” Chinese battery leader CATL has gone big on a battery chemistry that is lower density but doesn’t require as much cobalt, for instance.
Nakano agreed that substitutions of some minerals may be possible, but lithium plays a central role in essentially all EV battery chemistries. “Lithium is much harder than other minerals to replace,” she said.
Lange also said mining and processing companies have started paying more attention to byproducts that used to be discarded but now can be salvaged and sold. There is also an increasing focus on recycling of minerals from batteries that reach the end of their lives; the IEA projects that recycling could ease the primary supply requirements of lithium, copper, nickel and cobalt by around 10 percent in 2040.
It’s not yet clear whether the world’s mineral mining can catch up and eventually keep pace with the skyrocketing demand for electric vehicles. But after years of stagnation in the field outside of China’s prescient moves, the flurry of recent activity marks a clear departure from the past. Still, the decades of delay mean the world must now transition to EVs at a breakneck pace, and there are some rocky roads ahead.
Thanks to Lillian Barkley and Alicia Benjamin for copy editing this article.