A decade ago, the auto industry could not have foreseen that a semiconductor shortage would disrupt car production. But we can predict that a decade from now, automakers could face shortages of materials needed for electric vehicle batteries and other necessary components. Thank you shortages may appear even sooner than we predicted.
The increased content of Electronic devices in vehicles has closely linked automotive companies to the semiconductor industry. In 2020, semiconductor makers expected seasonal weakness in the fourth quarter but did not ramp up production. So when demand for cars suddenly surges, chipmakers can’t respond quickly. In addition to supply chain issues, semiconductors take 18 weeks to build, which is another reason for the status quo. Automakers are now competing with a large number of chip buyers, such as consumer electronics companies, for a limited supply of chips.
From a pure supply and demand perspective, the materials are similar. Now, the transition to zero-emission vehicles has propelled materials such as graphite, cobalt, nickel and manganese into the radar of automakers. IHS Markit said demand for electric vehicles is expected to reach nearly 2.5 million units in 2020, before growing by about 70 percent in 2021. Materials for EV batteries are not readily available. Graphite, used in lithium-ion battery anodes, could become scarce as early as next year.
According to market research firm Verified Market Research, the global electric vehicle battery market was worth $35.1 billion in 2019 and is expected to reach $133.4 billion by 2027. According to a report by Benchmark Mineral Intelligence, the demand for graphite in the battery industry is expected to grow at an annual rate of 30% until 2022 when it runs into a deficit.
Lewis Black, CEO of Almonty, an international raw material development company, explained that it is difficult to find graphite and materials that meet rare earth element (REE) requirements because it is difficult to extract from the ground. Like semiconductor factories, mines require billions of dollars in investment and years to build.
“Rare earth elements are ubiquitous, but the reason they’re not mined in environmental jurisdictions is that they require a certain level of water seepage, which makes mining them dirty,” Black said. “Nobody wants them in their backyard. These are Homes in the mines are cheap and less affected by community standards than in the Americas and the EU."
China mines and exports almost 17 rare earth elements. As China continues to build its own high-tech ecosystem, China may decide that exporting rare earths is not in the country’s best interests, Black explained. “If they decide not to export, there’s nothing you can do,” he said.
This is one of the questions the US will look at as it reviews US supply chains. Under the executive order, the Biden administration wants to assess how reliant the United States is on foreign supplies and services. Separately, Congress is seeking to bring semiconductor manufacturing to shore through the US CHIPS Act.
Focus on graphite
The United States cannot produce graphite, which the government has designated as an important mineral due to its importance in national security and the fragility of its supply chain. Benchmark estimates that by 2028, the amount of graphite needed for lithium-ion battery anode materials will soar to 1.75 million tons, a nine-fold increase from 2017.
Ceylon Graphite CEO Bharat Parashar explained that the limit of graphite is the purity of the material. The highest grade of graphite in the world was found in Sri Lanka. The Ceylon graphite mine is mined there and has invested in environmentally friendly and sustainable operations.
He explained that for renewable energy to be successful, storage is critical. Current technology shows that all energy storage products require graphite as an anode. As a result, automakers looking for EV batteries/storage batteries will face competition for raw materials.
“When the first discussion[美国对外国资源的依赖], it took a broader approach to finding domestic products,” explained Black. The current initiative is looking at coalitions.
"At first glance, the isolated approach doesn't look that great; it takes a long time to develop a mine. It takes 5 years to get a license only in certain areas. There are more options for US-friendly companies. In ten years Inside, you may have a strong and diverse competitive supply chain. You can't disadvantage your customers because you can't be competitive on price."
Should tech enter the mining industry?
If global partners are not enough, companies with major battery factories or heavy use of battery raw materials should consider vertical integration, i.e. buying mining operations. "For example, Tesla is in the battery/storage business and intends to build a large factory to produce their own battery/storage batteries, and if they want all of their plans to come to fruition, they should definitely consider purchasing raw material sources."
Founder Elon Musk believes Tesla will play an important role in sustainable energy and storage in addition to more affordable electric vehicles. Musk plans to phase out the use of cobalt in his battery cathodes in favor of iron phosphate, nickel as another cathode feedstock, the latter highly concentrated in Indonesia, Russia, Canada and the Philippines.
Musk is also known for mega-projects such as SpaceX, and his willingness to abandon typical supply chain practices may be the only way some of these transformational strategies will succeed, according to Pasal.
For example, if the global plan to have at least 150 million electric vehicles by 2030 is to be achieved, the world will need about 10 million tonnes of refined graphite (at least 12.5mm coarse graphite) and almost the same amount of other key minerals in short supply.
“Will there be enough product around? No, not enough development was taken into account,” he said.
In the electronics industry, vertical integration is once again prevalent. Power management company Vicor Corp. has expanded its Andover, Mass., plant so it can control its processes and designs. Executives said Vicor will produce power products faster and more efficiently at lower cost and with higher quality.
“For something like Musk or[Jeff] People like Bezos, conceivably, if they needed scarce raw materials to produce a variety of products, they might – and in my opinion, they must – source it. “If you’re going to be successful, whatever element you’re talking about, you need to be vertically integrated. “
Last year, Benchmark managing director Simon Moores told U.S. lawmakers that those who control these critical raw materials, as well as those with manufacturing and processing expertise, will maintain the balance of industrial power in the automotive and energy storage industries in the 21st century.
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