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Irina Slav

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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Could A Battery Metal Shortage Derail The EV Boom?

Electric vehicles are being hailed as one of the top answers to saving the planet from the polluting legacy of fossil fuels, but the EV revolution that proponents like to talk about so much is facing yet another challenge: a shortage of battery materials.

According to energy consultancy Wood Mackenzie, demand for battery metals is about to accelerate to double-digit rates over the next decade. This, Wood Mac research director for battery raw materials Gavin Montgomery said in an article for Forbes, means a supply crunch could come as soon as the mid-2020s.

The reason, according to Montgomery, lies in the lower prices of a few key metals, which have demotivated production ramp-ups, which bodes ill for the future balance of supply and demand. Lithium is one of these, with the EV industry already the single biggest driver for lithium demand despite the modest amount of the metal in car EV batteries. Another is cobalt, where medium-term supply is seen strong but problems may emerge in the longer run.

Then there is nickel—a metal that is an important element of an increasingly popular battery technology dubbed NMC (lithium, nickel, manganese, cobalt oxide). As with cobalt and lithium, low nickel prices have deterred investment in new production, which will backfire in the next few years as demand for batteries grows along with their size, and consequently the materials used to make them.

Wood Mac’s Montgomery is not alone in worrying about the supply of raw materials used in EV batteries, which is crucial for the electrification of global transport. Earlier this month, a mining industry executive issued the same warning in an interview with Bloomberg.

“It’s dawning on North America and Europe that there’s a raw materials issue that needs to be addressed here,” said Sam Riggall, chief executive of CleanTeQ Holdings, a company with a majority stake in the Sunrise nickel-cobalt-scandium project. Related: Mexico’s Very Risky Energy Bet

“For the previous two years, I’ve been wearing out a lot of shoe leather and banging on a lot of doors trying to get interest in Europe and North America with very little success. In the last six months things have changed quite dramatically.”

Awareness of a problem is usually the first step to solving it, but in this case the solution may be tricky to come by. Batteries are the most expensive component of a plug-in electric vehicle. Despite the lower lithium and cobalt prices, the prices of EVs have not fallen much.

They would need to fall quite a lot if they are to compete with ICE vehicles on a global scale. At the same time, batteries would need to be able to offer much longer ranges, meaning they would likely have to be even bigger, requiring even more raw materials. It’s a sort of a vicious circle for carmakers, and if Wood Mac’s analysts are right in their projects, it will tighten around them soon.

According to the consultancy, EV sales will come to account for 14 percent of total global sales by 2030 from a forecast 7 percent annually by 2025. This is what Gavin Montgomery has to say for the moment when EV’s pass the 10-percent mark:

“Unless battery technology can be developed, tested, commercialised, manufactured and integrated into EVs and their supply chains faster than ever before, it will be impossible for many EV targets and ICE bans to be achieved – posing issues for current EV adoption rate projections.”

By Irina Slav for Oilprice.com

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