A large number of minerals are required for energy transition. While the U.S. Geological Survey (USGS) indicates that mineral resources might be inexhaustible, minerals are not easy to obtain. Instead, mineral extraction involves complex issues from geopolitical concentration, material quality, average lead time in the mining industry to environmental factors, all of which will decide whether humans can get the ores they want. In its report, KGP Auto—a UK-based powertrain consulting firm—concludes that the sophisticated supply chain problems behind mineral-intensive electric vehicles will lead to shortages of critical resources.
According to KGP Auto’s latest report on supply constraints of critical metals for EV manufacture, global copper production has nearly peaked, while copper reserves are running out along with ore grade decreases among older mines (e.g., copper production has declined in Chile). Moreover, mining process requires a lot of water, but most mines are located throughout South America and Australia where water resources are scarce. People’s rising awareness of environmental problems such as CO2 emissions and waste management has imposed another constraint of copper mining.
Quality requirements of nickel for EVs are the most stringent compared with those of other metals. However, most nickel stocks in the global supply chain cannot satisfy the requirements of EVs, with the Democratic Republic of the Congo and China accounting for 70% of production. Additionally, about 90% of cobalt is a by-product of nickel and copper, causing the metal’s supply to be subject to the development of the copper and nickel mines. Similarly, the supply chain of rare earth—from extraction to processing and magnet production—has been heavily concentrated in China. Currently, Bayan Obo of Inner Mongolia in China is the largest known deposit of rare earth.
As for lithium that worries Elon Musk the most, KGP Auto reported that the metal’s supply will severely fall short of demand as early as 2025. Although new mines have been discovered, it will take 16.5 years on average for lithium mines put into operations in 2010–2019 to start extraction. Likewise, China has control over the mineral, accounting for 60% of global production and more than 80% of lithium hydroxide production. More than half of lithium deposits are located in areas suffering water scarcity, just like their copper counterparts.
The demand for EVs mostly comes from Western countries, but critical minerals are mainly supplied by China, South America, and Africa with largely uneven distribution. For example, China per se owns more than half of the world’s lithium, cobalt, and graphite processing and refining capacity as well as three-quarters of all lithium-ion battery production capacity. Europe accounts for more than a quarter of global EV assembly, but the continent’s critical mineral supply is extremely low. Moreover, the US only accounts for 10% of global EV output and 7% of battery production. South Korea and Japan dominate the downstream supply chain. Specifically, South Korea accounts for 15% of global cathode material production, while Japan secures a 14% and 11% share of cathode and anode material production worldwide, respectively.
KGP Auto suggests that the fuel energy mix should be diversified and emphasizes role of platinum group metals (PGM) in the rise of hydrogen. The IMF Annual Report 2021 warned that the demand for metals triggered by energy transition is likely to exceed the current global supply. In December 2022, Energy Futures Lab of Imperial College London indicated that shortages of lithium, cobalt, tellurium and copper might hinder the energy transition progress. In short, there won’t be more EVs without more mining activities.
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