Raw materials for e-cars are becoming scarce

Düsseldorf, Salar de Atacama, Zurich Germany has definitely planned a veritable special boom in electromobility. To achieve the political climate goals, approximately 15 million electric cars should drive on German roads by 2030.

There is only one problem: There will not be enough lithium available to achieve these goals. It shows the latest calculations from the Federal Institute for Geosciences and Natural Resources (BGR), which are available exclusively for Handelsblatt. For the main raw material for the construction of electric car batteries is also extremely popular in the rest of the world.

“Even if all projects that are currently planned and under construction are carried out according to schedule and we assume average growth in demand, we will not have enough lithium to cover global demand by 2030,” explains study author Michael Schmidt from BGR in an interview with Handelsblatt. In 2020, 82,000 tonnes of lithium were produced worldwide.

Experts estimate that demand over the next eight years will increase to at least 316,000 or more than 550,000 tonnes per year, depending on the scenario. 90 percent of the processed raw material then flows into lithium-ion batteries for electric cars. According to BGR experts, in the worst case there will be a shortage of 300,000 tonnes of lithium per year by 2030. At best, still 90,000 tonnes – as much as is currently produced per year.

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If the European Commission plans to ban cars with internal combustion engines by 2035, demand is likely to increase even faster than previously assumed in the coming years. The forecast gives critics of the plans, such as Federal Finance Minister Christian Lindner (FDP), new arguments for staying with the conventional internal combustion engines longer.

Other market observers also share skeptical expectations. The Advanced Propulsion Center (APC), a scientific advisory body to the UK Government and the national automotive industry, estimates that by 2030, 40 million electric cars will not be produced worldwide, but only 25 million due to the lithium gap. “There is simply not enough lithium, even if it is not a scarce resource geologically,” warns Schmidt.

Time and time again delays in lithium supplier countries

There are lithium reserves of over 21 million tonnes worldwide. A large part of the deposits are in Australia, but mainly in Chile. Over and over again, there are delays, lengthy approval procedures and downtime in planned projects. Each country has different and sometimes complicated framework conditions.

“In Mexico, the lithium industry has just been nationalized. In Chile, too, there are considerations to nationalize lithium production in whole or in part, and in principle it is simply too little investment,” explains BGR expert Schmidt. to be missing only until 2030.

Lithium mining in northern Chile

From a geological point of view, the raw material is actually not a scarce resource.

(Photo: REUTERS)

This already affects the price. It has arranged an unprecedented rally in the last 24 months, doubling from year to today. Compared with January 2021, the price of lithium carbonate is even seven times higher.

The industrial service Fastmarkets recently set the prices for battery-quality lithium carbonate for the Chinese market at between 71,000 and 75,000 dollars per tonne. The important Asian reference price is thus just below the record high of around 78,000 dollars per tonne.

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Prices are stable and high, according to Fastmarket’s analysts. They observe “limited trading activity with a limited supply.” Given the high prices, many cathode manufacturers in China are currently reluctant to buy in the spot market. However, it is not to be expected that lithium will become cheaper in the foreseeable future. The looming gap is likely to push the price even higher in the coming years.

Although the mining industry wants to expand its production capacity under high pressure, it is struggling with its own problems. Example Chile: The company Sociedad Química y Minera de Chile (SQM) is one of the three largest manufacturers in the world. About 27 percent of the world’s known lithium reserves are found in Chile’s Atacama Desert, where SQM produces.

But there is currently a bill in Congress that would declare SQM’s lithium mining a national interest – and the company could be expropriated immediately. Industry will become a state monopoly. It is therefore quite possible that the world’s largest lithium producer will soon be able to deliver less and less despite the demand boom.

>> Also read: Lithium producers’ eco-problems

Projects of up to 275,560 tonnes of lithium by 2030 are currently planned worldwide. This includes just over 27,000 tonnes of recycled raw material. Even if everything goes according to plan, it is not enough. A lithium project takes five to ten years to develop. “So you should have started two years ago to be able to reduce this gap to some extent,” Schmidt explains. But that was exactly what did not happen. There is a lack of capital for new mining projects everywhere. Mainly from Europe.

The investments are also lacking as many financiers continue to alienate the mining industry. “There are more than enough resources, but there is no guarantee that these raw materials will be available when we need them and, above all, at a reasonable price,” IEA chief Fatih Birol warned a year ago. Mining companies such as SQM, Albermarle and others can not raise the amounts required on their own.

In particular, the largest buyers should have an interest in sufficient raw materials for the market: the car companies. But while Tesla is openly considering investing in projects and even the Chinese manufacturer BYD is about to make an investment, German carmakers have so far been reluctant to make final decisions.

Europe’s largest car manufacturer Volkswagen does not currently buy raw materials such as lithium for battery production. Instead, the necessary material is purchased from the cell suppliers. A spokesman for VW said on request that the capacity and demand situation is constantly monitored together with the suppliers. The car company is convinced that it will be able to cover the need for lithium in the future.

Volkswagen relies on recycling

With the planned in-house production of battery cells from 2025 onwards, VW will in future have direct contact with raw material suppliers. The Group has signed a first supply agreement with the German supplier Vulcan Energy. But the project is still at an early stage. Talks are currently underway with other potential raw material suppliers, the spokesman added.

Volkswagen also relies mainly on the recycling of raw materials. In the future, a recycling rate of over 75 percent is conceivable, “so that the need for primary materials can be significantly reduced,” says Wolfsburg.

However, recycling will only become more important when there are actually millions of electric cars on the roads. It is widely expected in the automotive industry that this will be the case by the end of the decade. At the time, recycling could only cover up to ten percent of total European demand, BGR estimates.

“We can not even begin to meet our potential needs from Europe itself. We are extremely dependent on imports and do not even have a good position when looking at the market “, warns Schmidt. This is how Europe ends up in a dangerous price dependence. Even in the most optimistic scenarios, one would be 56 percent dependent on imports.

Most of them would then come from companies in China. Battery cell manufacturer CATL and supplier Ganfeng have invested heavily in recent years. Especially where European companies often have obstacles due to political uncertainties: in Mali and Congo, where two of the largest deposits in Africa are located. Or in Argentina and Australia.

Americans are likely to claim most of their resources for themselves. Also because US President Joe Biden has reactivated an old law that requires domestic industrial companies to produce certain goods – in this case lithium, nickel, cobalt, graphite and manganese.

>> Read here: Lithium production for electric cars is slowly advancing in Europe

There is hardly anything left for Europeans. For this reason, just a week ago, the federal government and a delegation from the Federal Ministry of Economy in Chile personally tried to establish good relations with the second largest supplier of lithium in the world. As you can hear, it was well received in the Latin American country. But that alone is far from enough to close the lithium gap.

More: Energy transition in Chinese hands: Germany’s dangerous dependence on raw materials

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