Key Battery Metals Need Increased Investment to Meet Climate Targets

According to Wood Mackenzie’s Accelerated Energy Transition (AET) scenario, the battery raw materials supply chain requires much more investment by 2030.

According to Wood Mackenzie’s Accelerated Energy Transition (AET) scenario, which sees global warming limited to 2.5 degrees (Celsius), the battery raw materials supply chain requires much more investment by 2030. The AET brings electric vehicle (EV) uptake forward by 10 years and sees EVs make up around 40 percent of passenger car sales by 2030. This considerably accelerates the demand for batteries and the raw materials that go into them.

As noted in the research, the AET would require nearly 800 kt LCE of additional lithium to come online in the next 5 years to meet the needs of the battery sector. This would see the global lithium market surpass 1 million tonnes LCE in 2025. Further, the cobalt market would have to double by 2025. To put this into perspective, to meet the incremental demand from EVs through 2030, an additional 8 mines the size of Glencore’s Katanga would be required.

As it stands, the battery sector makes up less than 5 percent of the total nickel demand. Under the AET, this would rise rapidly to 20 percent by 2025 and 30 percent by 2030. An additional 1.3 million tonnes of nickel suitable for the battery sector would be required by 2030. With graphite used in nearly all lithium-ion battery types, it is a similar story. The battery sector would make up more than 35% of demand by 2030, with demand growing by 1.6 million tonnes by that date.

The scale of the challenge is clear and leaves the industry with two options: increase supply or decrease demand.

“Given that spot prices for most battery metals are currently in the doldrums, and miners typically require higher prices to incentivise new supply, relying on the natural cycle of mine development would appear to be a losing strategy if the world requires a large number EVs in a short space of time. An AET will need a helping hand to get things moving,” said Gavin Montgomery, Wood Mackenzie Research Director.

The OEM–cell producer partnership has become increasingly common over the past few years. However, except for a small group of companies, OEMs are yet to take the plunge with investing in mining assets. If OEMs do not choose to secure their own supply, the analysts’ believe EV sales penetration rates are unlikely to surpass 15 percent in the medium term.

During China’s steel boom, the government encouraged companies to invest in overseas mining assets to secure supply. Although the policy had varying levels of success, the pattern has continued and China currently controls a large share of battery raw materials supply.

Finding alternative sources of metals, including using secondary supply through recycling, is another option available to the industry. However, as noted in the research, current EV sales are too low to generate a sufficiently large scrap pool to create any meaningful new source of supply by 2030. “Scrap supply will become increasingly important as we move further out beyond 2030 but will be no magic pill over the coming years,” added Montgomery.

With so many challenges surrounding a supply increase, the analysis believes that a more likely alternative may be to reduce the demand for these critical battery materials investment

EV charging capabilities and the availability of charge points are all still too limited for consumers to be comfortable with smaller battery packs. This has encouraged the trend of longer ranges and bigger battery packs and the analysis expects this to continue throughout the next decade.

The research brings forward Fuel-cell electric vehicles (FCEVs) that do not have the same demand for battery raw materials as battery electric vehicles (BEVs) and so their proliferation could reduce the strain on metals supply through the medium term.

Unfortunately, the progress of FCEV technologies has been slow over the past few years. Several major automakers have abandoned their FCEV efforts and switched to BEV manufacturing. Aside from the limited support from key automakers, fuel-cell technology must compete with the rapid progress of lithium-ion technology.

“If the world is to pursue an accelerated energy transition, much more capital will be required in a very short space of time for the development of the battery raw materials supply chain – from mines through to refineries and cell production facilities. Yet with low prices and the global economy suffering from a recession, the prospect of this being achieved is limited,” concluded Montgomery.