As the US and its allies try to reinforce their mineral supply chains to cut dependence on China, Africa will help bridge the supply deficit for minerals essential to the green energy transition, observers say.
In a bid to reduce greenhouse gas emissions, various countries are encouraging development and use of electric vehicles (EVs).
China is a major player in the industry, from dominating the processing of critical minerals used to make EV batteries to being the top producer and seller of electric cars.
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But a sustainable future in the industry depends on access to a steady supply of essential metals, particularly lithium.
Australia, Chile and Argentina remain the key source markets for lithium but Africa is likely to supply a high proportion of the necessary minerals needed for EV rechargeable batteries.
Currently, Chinese companies dominate the exploration and extraction of battery metals from Africa, especially in the Democratic Republic of the Congo (DRC) and Zimbabwe. China sources more than 60 per cent of its cobalt – another EV battery material – from the DRC and since last year, Chinese companies have made acquisitions in Zimbabwe for lithium. China also has interests in other resource-rich African countries, including Zambia, Namibia and South Africa.
Demand for lithium has risen sharply, sending the lithium industry into overdrive.
According to Benchmark Mineral Intelligence, the lithium price index is up 140.6 per cent so far this year. A tonne of lithium hydroxide, which is used in batteries with high nickel content, was on Friday trading at US$83,200 at the London Metal Exchange.
Chris Berry, president of commodities advisory firm House Mountain Partners in New York, said the rapid rise in lithium prices was the result of a number of events.
He said these factors included government policies such as subsidies to buy electric vehicles; the environment, social and governance movement; and “that most importantly, the legacy automotive manufacturers have finally woken from their slumber and realised that security of supply of battery metals including lithium is vital to their EV sales goals”.
“Without adequate supplies of battery raw materials including lithium, cobalt, and nickel, [manufacturers] will have a difficult time maintaining and growing market share in an increasingly competitive EV sector,” Berry said.
He said global lithium demand should increase by close to a factor of five by 2030 and this is all due to the growth of the lithium-ion battery business.
China is the dominant player in global lithium refining and processing, accounting for about 59 per cent of the world’s total. Meanwhile, the US refines just 3 per cent and Canada 3.5 per cent, according to Benchmark’s Lithium Forecast.
But the United States and some other Western nations are not letting China unchallenged. The US wants to build its own critical metals supply chain and has promised to provide massive tax incentives to make “new and used EVs more affordable” using minerals and battery components from the US and its allies.
That includes US$2.8 billion allocated in October by the US Department of Energy to expand domestic manufacturing of batteries for electric vehicles and the electrical grid.
Britain also plans to have its first lithium refinery in two years. Green Lithium, which is backed by commodity trader Trafigura, announced plans to build a £600 million (US$170 million) refinery to produce around 50,000 tonnes of battery-grade lithium hydroxide starting in 2025. This will be enough for around 1 million electric vehicles.
Defense Metals president Luisa Moreno said that in the short to medium term it might be difficult for the West to build a fully integrated supply chain for critical materials.
“With continuous investments and collaborations between companies and governments in North America, Australia and Europe, we may start seeing integrated supply chains from mine to technology, in relevant amounts in the next 8-15 years,” Moreno said.
She said this was likely to start with base metals such as copper and battery-grade nickel, and then the more critical ones like cobalt, graphite, lithium, manganese and then rare earths.
“Mining is just one aspect of the supply chain. Producing advanced chemical compounds and metals and then the downstream devices, parts and machines, involves new skill sets that would have to be developed and it takes time,” Moreno said.
Berry agreed that long lead times were needed to establish supply chains.
He said the US’ Inflation Reduction Act was meant to kick-start a more localised supply chain through tax credits, subsidies and grants.
“While this is all good news, it will still take 10 years to build any sort of a sufficient supply chain given the huge lead times needed for mining permitting in particular,” Berry said.
Zayn Jaylan, CEO and director at Infinity Stone Corp, an EV metals supplier, said Africa’s critical minerals would help address the EV revolution and many of the other technologies needed to tackle climate change.
“The high-grade deposits found in Africa are the most economic in the world, as well as presenting the least impact to the climate and lowest greenhouse gas emissions,” Jaylan said.
Moreno of Defense Metals, agreed, saying she “doesn’t think we can develop hundreds of mines of critical minerals – as projected by the International Energy Agency – and produce a large volume of these materials without a significant contribution from Africa”.
Moreno said many Western countries had set out targets of between three and 13 years to phase out internal combustion engine vehicles, and many believe that it is an aggressive target, so some companies may be stockpiling.
“The high lithium prices promote mining exploration and development, which is important but current prices are likely not sustainable in the long term,” Moreno said.
“Chinese investors seem to have a higher risk tolerance and the mining companies seem to have the financial and technical capacity to advance projects in a timely manner, and do not seem to hesitate to go where the raw materials are, independently of the geographic risk.”
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.
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