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Electromobility: There is a risk that the electric car boom will not materialize: “There just isn’t enough lithium out there”

Electromobility: There is a risk that the electric car boom will not materialize: "There just isn't enough lithium out there"

Dusseldorf, Atacama Salt Flat, Zurich Germany has resolutely planned a real special boom in electromobility. In order to achieve political climate goals, around 15 million electric cars should be on German roads by 2030.

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

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

In the next eight years, experts calculate, depending on the scenario, that demand will increase to at least 316,000 or more than 550,000 tonnes per year. 90% of the processed raw material is then transformed into lithium-ion batteries for electric cars. According to BGR experts, in the worst case, there will be a shortage of 300,000 tons of lithium per year in 2030. In the best case, still 90,000 tons – 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 expected to increase even faster than expected in the coming years. The forecasts provide critics of the plans, such as Federal Finance Minister Christian Lindner (FDP), with new arguments for keeping conventional combustion engines longer.

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

Again and again lithium delivery delays for electric cars

There are lithium reserves of over 21 million tons worldwide. A large part of the deposits are in Chile, but also in Australia. Again and again there are delays, lengthy approval procedures and blockages 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 there is simply too little investment,” explains BGR expert Schmidt. According to expert estimates, investments of between 30 and 50 billion euros will be missing by 2030 alone.

Lithium mining in northern Chile

From a geological point of view, the raw material is in fact not a rare resource.

(Photo: Reuters)

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

Industry service Fastmarkets recently determined battery-grade lithium carbonate prices for the Chinese market to be between $71,000 and $75,000 per ton. The important Asian benchmark price is thus just below the all-time high of around $78,000 a tonne.

Prices are stable and high, according to analysts at Fastmarkets. They observe “limited commercial activity with limited supply”. Given the high prices, many cathode manufacturers in China are currently reluctant to buy from the spot market. However, lithium should not be expected to become cheaper in the foreseeable future. The looming gap is likely to push the price even higher over the next few years.

The price of lithium could continue to rise

Although the mining industry wants to expand its high-pressure production capabilities, it is struggling with its own problems. 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 located in the Atacama Desert in Chile, where SQM produces.

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. Industry must 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 boom in demand.

>> Read also: The ecological problem of lithium producers

Projects of up to 275,560 tons of lithium by 2030 are currently being planned around the world. This includes just over 27,000 tonnes of recycled raw materials. Even if everything goes as planned, that 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 cushion that gap to some extent,” says Schmidt. But that is exactly what did not 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”, warned a year ago the boss of the IEA , Fatih Birol. Mining companies such as SQM, Albermarle and others cannot raise the necessary sums on their own.

The biggest buyers in particular should have an interest in having enough raw materials for the market: the car manufacturers. But with Tesla openly considering investing in projects, and Chinese automaker BYD also poised to invest, German automakers have so far been reluctant to make final decisions.

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

Lithium: Volkswagen bets on recycling

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

In addition, Volkswagen relies mainly on the recycling of raw materials. In the future, a recycling rate of more than 75% is conceivable, “so that the need for raw material can be significantly reduced”, says Wolfsburg.

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

“We cannot even begin to meet our potential needs ourselves from Europe. We are extremely dependent on imports and are not even in a good position when you look at the market,” warns Schmidt. This is how Europe finds itself in a dangerous dependence on prices. Even in the most optimistic scenarios, we would be 56% dependent on imports.

Europe still dependent on lithium imports for electric cars

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 encounter 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 lithium resources for themselves. Also because US President Joe Biden 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 progresses slowly in Europe

There is almost nothing left for the Europeans. For this reason, just a week ago, the Federal Government and a delegation from the Federal Ministry of Economy of Chile personally tried to establish good relations with the second largest lithium supplier 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.

After: The energy transition in Chinese hands: Germany’s dangerous dependence on raw materials

First published: 6/22/22, 4:05 p.m..

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