September 20, 2022 • 5 min read
Decarbonization: understanding the challenges and opportunities for battery materials producers
With 2050 looming quickly, the pressure is on to rapidly increase the supply of battery materials
“Electric vehicle (EV) production is proving to be both viable and economical,” says Greg Pitt, Vice President, Batteries. “And with government regulations demanding new cars be fully electric in the coming years, there’s now a renewed rush to acquire and refine battery-grade minerals and metals.
“The world has made batteries for centuries, but the scale required for the electric mobility revolution is affecting the value chain’s ability to operate effectively,” he says.
“What this has shown is the global battery materials value chain is fragmented because of the pace at which the market has developed, and how hard it is for miners to keep up.
“As an example, five years ago, lithium wasn’t considered an important material by Western economies. All that has changed. Companies and countries need more batteries – as well as manufacturing capabilities – and the value chain fragmentation is deepening.”
The supply of key battery materials is inelastic
The upstream mining value chain that produces raw battery minerals can’t increase supply quickly. It can take a decade to quantify a resource, develop permitting approvals, work through the design definition, and move into construction before mining operations finally commence.
“Suddenly, there’s extreme demand for raw minerals, yet it’s going to take decades to develop new mines from greenfield deposits, if we follow standard development cycles,” Pitt explains. “We can view this imbalance of demand and supply through surging commodity prices for nickel, lithium and cobalt.”
According to Pitt, this supply challenge is also a result of a shortage of supporting resource infrastructure to bring battery materials to market.
“The infrastructure to move this material doesn’t exist at the scale that’s required,” he says. “There is a gap outside of Asia or, more specifically, China, which is very mature in this industry.”
The search for socially responsible suppliers
As Pitt explains, the supply challenge is compounded by the carbon footprint and environmental, social and corporate governance (ESG) credentials of some producers, that often don’t meet the expectations of European automakers.
“Materials such as cobalt, a key component of some of the cathode chemistries, are frequently mined in the Democratic Republic of the Congo (DRC), before they are sent to China for processing,” says Pitt. “Buyers don’t necessarily have visibility of how socially responsible this cathode material is.”
Nickel has also been in the spotlight due to Russia’s invasion of Ukraine in 2022. According to Forbes, approximately 11 percent of global nickel production in 2021 came from Russia.
“Organizations are now seeking alternatives to nickel, too,” notes Pitt. “In a matter of days, prices increased to levels we’ve never seen before – and the social responsibility of some suppliers changed overnight – reflecting how quickly these markets are moving.”
Collaborating to address geopolitical pressures
According to Pitt, geopolitical shocks are driving increasing interest in creating supply chains that are less exposed to these pressures.
No single country – or company – can solve this problem on its own. It will require collaboration to lift supply responsibly, because no country has both the raw materials and the demand side to solve the problem, other than perhaps China.
In the US, the Biden administration, via its bipartisan US $1 trillion infrastructure bill, is committing to developing more localized supply chains.
“This should incentivize more production of both raw materials and their active components to be developed at scale within the region,” says Pitt. “Tesla is producing vehicles at scale already. It’s a first mover in the market at large, but currently buys most of its materials from outside of the US.
“This program should also incentivize collaborations to develop new technologies to improve battery performance. This can help reduce the size of batteries without compromising performance, and it should also minimize their carbon footprint and waste streams.”
Other elements determine the viability of value chains, too.
“For example, the UK has been hampered by its ability to provide renewable power without tariffs,” says Pitt. “This is making renewable energy unattractive for its local energy intensive processing or manufacturing facilities, compared to other parts of the world like Scandinavia or Quebec.”
Reinventing the traditional approach to developing infrastructure
Pitt believes the industry needs to change the way it delivers infrastructure to meet the expanding demand for battery materials.
“One of the biggest challenges is that these are large facilities in the range of US $100m to US $1bn in capital expenditure,” explains Pitt. “These are significant investments, particularly for emerging companies.
“And in terms of getting critical materials to market quickly, a traditional approach to building a single processing facility can take five or six years, as companies create a business case to attract capital. Then they’ll start the process again for their next facility. This approach isn’t fast enough to respond to soaring demand.”
Standardization to accelerate battery manufacturing
The solution, according to Pitt, is for the battery materials sector to adopt a manufacturing mindset.
“This means actively developing solutions to standardize their enormous battery manufacturing facilities,” says Pitt.
“Designing facilities once – as you would design a car – means you can manufacture dozens of facilities, upgrading the ‘model’ every few years to adapt or incorporate the latest technology. That’s how the industry can best respond to the demand shock that’s occurring.
“Processing elements are also open for standardizing,” continues Pitt. “Customizing every step of the way slows things down. But by standardizing elements across the value chain, we’ll be able to deploy capital faster, because things will be common and needed at scale.
“An example of this approach is our partnership with ABB and IBM to form a repeatable process to build, operate and manage green hydrogen facilities at scale. This approach is replicable in the battery manufacturing sector, too.”
Pitt believes a modularized approach to manufacturing will challenge conventions across sector, but ultimately unlock a new level of efficiency.
“This cookie-cutter solution is going to require heightened levels of collaboration and networking across both the value chain and the supply chain,” Pitt says.
“It’s a significant shift, but standardization is the most viable approach for the battery materials sector to capitalize on surging demand for batteries and decarbonize in the most efficient way possible.”