The ongoing transition away from fossil fuels will likely trigger shortages of some key metals used in electric vehicle batteries requiring hundreds of new mines. This is according to industry experts who expect demand for EV batteries to spike to tens of millions of units annually in the years ahead.
The projected sixfold arises in demand for lithium-ion batteries over the next decade means up to 384 additional graphite, lithium, nickel and cobalt mines may be needed by 2035 to supply all those new EVs, industry forecaster Benchmark Minerals said in a report. Even a big increase in battery recycling, as planned by companies including Redwood Materials and Li-Cycle, would only cut the number of new mines to 336, according to Benchmark.
“We’re heading toward an extreme cliff that, unfortunately, our industry needed to invest $100 billion five years ago to avoid,” Brian Menell, chairman and CEO of TechMet, a Dublin-based firm that’s backing companies producing and processing EV battery metals, awning Forbes. “Over a two-to three-year horizon, the pain is going to become severe. And that pain is going to grow over the subsequent five to eight years from a constrained supply of battery metals.”
Over the past two years, automakers have announced billions of dollars of investments for new production lines specifically designed to build electric vehicles and the batteries to power them. But that’s the easy part. Ensuring adequate supplies of metals and minerals to make battery cathodes and anodes—currently sourced almost entirely from China, South Korea and Japan—means automakers need to either become skilled commodity traders or partner with firms that are. Though Menell estimates the real supply crunch won’t begin for three to five years, market prices for critical materials are already surging. Lithium carbonate, the battery-grade version of the metal, hit a record $71,315 per metric ton on Sept. 16, Bloomberg reported, citing data from Asian Metal Inc.
“GM now has binding agreements securing all battery raw materials supporting our goal of 1 million units in annual capacity in North America in 2025,” chair and CEO Mary Barra said in the company’s earnings call in July. “This includes lithium, nickel, cobalt, and the full (cathode anode material) supply.”
Redwood, led by Tesla
Tesla, the top global EV brand, has said it plans to scale up its factories to make 2 million vehicles annually by next year and ten times that level by the end of the decade.
“If you just look at Tesla’s ambition to produce 20 million electric vehicles a year in 2030, that alone will require close to two times the present global annual supply—and that’s before you include VW, Ford, GM and the Chinese,” Menell said . Elon Musk’s company is also especially reliant on China for battery materials.
“Tesla today buys 85% of its inputs from China or China-controlled supply chains,” Menell said. If there were any disruption or change in the company’s friendly relations with government officials there, “China could close down Tesla in a matter of weeks,” he said.
Tesla didn’t respond to a request for comment.
(For more on sourcing battery minerals, see California’s Lithium Rush For EV Batteries Hinges On Taming Toxic, Volcanic Brine)
Adding new mines will take time and can create environmental damage, including groundwater pollution, excessive water use, destruction of wildlife habitats, damage to topsoil, harmful runoff from chemicals used in some mining operations and pollution from tailings, the residual materials left after valuable metals have been removed. That’s one reason that GM and TechMet are investing in lithium extraction projects near the Salton Sea, pulling the silvery metal from hot volcanic brine that’s already being used to power geothermal energy plants in the region. The potential amount of lithium available in that part of California is vast, but the process of extracting it from the brine is still experimental and isn’t yet being done at commercial scale.
“We simply won’t fulfill demand by 2035,” Moores tells Forbes. “On average the miners are getting the material out of the ground at half the speed the lithium-ion battery and EV industry needs it. This may improve over this decade but demand for electric vehicles will not be satisfied—or reach a stable mature industry level—until we enter the 2040s.”
The challenge of expanding supplies is complicated by the need to limit damage to the environment and sustainable extraction methods, says Menell. For example, a potentially promising alternative to mining and volcanic brine includes collecting stone nodules on the ocean floor that are rich in sought-after minerals but that risks damaging aquatic ecosystems. Startups including DeepSea Metals, for example, have seen opposition from environmental groups over their plans to deploy large robots to mine the ocean floor for minerals such as cobalt and nickel.
New US legislation signed into law that creates incentives for domestic production of batteries, minerals and sourcing of components from within North America and from US allies is a big help but vastly more investment is needed, according to Menell.
“One of the big solutions is for the big pools of climate change, impact-investing ESG capital out there to stop wasting their time with autonomous driving software startups and focus on facts,” he says. “Unless they put tens and tens of billions of dollars into mining and metals–albeit ESG-compliant and well-managed mining and metals–we’re not going to have an energy transition and we’re not going to meet climate change goals. ”