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Important raw materials for electric cars are becoming scarce

Dusseldorf, Salar de Atacama, Zurich Germany has firmly planned a real special boom in electromobility. To meet the political climate targets, around 15 million electric cars are expected to be on German roads by 2030.

There is only one problem: there will not be enough lithium available to achieve these goals. This is demonstrated by the latest calculations by the Federal Institute of Geosciences and Natural Resources (BGR), available exclusively to the Handelsblatt. Because the most important raw material for the construction of electric car batteries is also extremely popular in the rest of the world.

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

Experts estimate that demand will increase to at least 316,000 or more than 550,000 tons per year over the next eight years, depending on the scenario. 90 percent of the raw material processed then flows into lithium-ion batteries for electric cars. According to BGR experts, in the worst case scenario, there will be a shortage of 300,000 tons of lithium per year in 2030. In the best case, still 90,000 tons, what 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 provides plan critics, such as Federal Finance Minister Christian Lindner (FDP), with new arguments to keep conventional combustion engines longer.

Other market observers also share skeptical expectations. The “Advanced Propulsion Center” (APC), a scientific advisory body of the British government and the national automotive industry, assumes that by 2030 the forecasts of 40 million electric cars will not be produced worldwide, but only 25 million due to the lithium gap. “There isn’t enough lithium, even though it’s not a geologically scarce resource,” warns Schmidt.

Again and again delays in the delivery of lithium for electric cars

There are over 21 million tons of lithium reserves around the world. Most of the deposits are located in Chile, but also in Australia. Again and 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 the investments are simply too little, “explains BGR expert Schmidt. According to expert estimates, investments will be lacking only in 2030. between 30 and 50 billion euros.

Lithium mining in northern Chile

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

(Image: REUTERS)

This is already having an impact on the price of lithium. He has organized an unprecedented rally in the past 24 months, only doubling since the start of the year. Compared to January 2021, the price of lithium carbonate is even seven times higher.

Industry Service Fastmarkets recently determined that lithium carbonate battery prices for the Chinese market are between $ 71,000 and $ 75,000 per tonne. The important Asian reference price is therefore just below the record high of around $ 78,000 per ton.

Graphic

Prices are stable and high, according to Fastmarkets analysts. They are looking at “a limited business with a limited supply”. Due to high prices, many cathode manufacturers in China are currently reluctant to buy on the spot market. However, lithium cannot be expected to become cheaper in the foreseeable future. The looming gap is likely to push the price even higher in the coming years.

The price of lithium may continue to rise

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

However, there is currently a bill in Congress that would declare SQM’s lithium mining a national interest – and the company could be expropriated immediately. The industry will become a state monopoly. So it is entirely possible that the world’s largest lithium producer will soon be able to supply less and less despite the boom in demand.

>> Read also: The ecological problem of lithium producers

Projects for up to 275,560 tons of lithium by 2030 are currently planned worldwide. This includes just over 27,000 tons of recycled raw materials. Even if everything goes according to the times, it is not enough. Developing a lithium project takes five to ten years. “So you should have started two years ago to be able to close this gap to some extent,” explains Schmidt. But that’s exactly what didn’t happen. There is a lack of capital for new mining projects everywhere. Mainly from Europe.

Investment is also lacking as many financiers continue to alienate the mining industry. “There are more than enough resources, but that does not 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 cannot collect the required sums on their own.

The biggest buyers, in particular, should be interested in enough commodities for the market: car manufacturers. But while Tesla is openly considering investing in projects and Chinese manufacturer BYD is also about to make an investment, German automakers have so far been reluctant to make the final decisions.

The largest European carmaker Volkswagen currently does not purchase raw materials such as lithium for the production of batteries. Instead, the necessary materials are purchased from the cell suppliers. A VW spokesperson said on request that the capacity and demand situation is constantly monitored together with suppliers. The automaker is confident that it will be able to cover its lithium needs in the future.

Lithium: Volkswagen focuses on recycling

With the planned in-house production of battery cells from 2025 onwards, VW will be in direct contact with raw material suppliers in the future. The group has signed a first supply contract with the German supplier Vulcan Energy. But the project is still in the early stages. Talks are currently underway with other potential raw material suppliers, the spokesperson added.

In addition, Volkswagen focuses primarily on the recycling of raw materials. In the future, a recycling rate of over 75 percent is conceivable, “in order to significantly reduce the need for primary material,” 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 that point, recycling could only cover up to ten percent of total European demand, the BGR calculates.

“We can’t even start meeting our potential needs from Europe ourselves. We are extremely dependent on imports and we are not even in a good position when it comes to the market, “warns Schmidt. This is how Europe enters a dangerous dependence on prices. Even under the most optimistic scenarios, 56% would depend on imports.

Europe still depends on lithium imports for electric cars

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

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

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

There is almost nothing left for the Europeans. For this reason, just a week ago, the federal government and a delegation of the Federal Ministry of Economy in Chile personally tried to establish good relations with the second largest lithium supplier in the world. As you can hear, it has been well received in the Latin American country. But that alone is far from enough to bridge the lithium gap.

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

First publication: 06/22/22, 4:05 pm.

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