From Financial Review

Why lithium is the centre of the $765b battery arms race

In 2030, the world will need as much lithium in one year as was mined between 2015 and 2022. And that’s going to take a lot of investment.

Jun 28, 2023 – 5.00am

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Australia is thankfully past the silly debates about the need for the energy transition, but the past weeks have made it clear that there’s a new and arguably more worrying problem to contend with: the sheer practicalities of decarbonisation.

A week after Daniel Westerman, the chief executive of the Australian Energy Market Operator, warned that local investment in renewable energy had effectively stalled, BHP chief executive Mike Henry made clear the challenges the world faced in providing the raw materials required to deliver the transition.

“We need a massive wave of capital investment – perhaps an additional $US100 billion ($148 billion) per year in capital investment in the resources sector – if the world is to get on track” to keep global warming to 1.5 degrees, as per the Paris climate agreement, the CEO told the World Mining Congress in Brisbane.

For the commodities that BHP sells, production needs to soar: two times as much for copper in the coming decades as in the past few, four times as much for nickel, twice as much for steel and twice as much for potash.

But a new report by battery minerals research house Benchmark suggests the pressure on critical minerals such as lithium, cobalt and graphite, is just as intense. Benchmark estimates that at least $US561 billion ($765 billion) needs to be invested between now and 2030 to ensure the global battery minerals supply chain – from mines to processing facilities to factories – can keep up with demand for electric vehicles.

And lithium is at the heart of this challenge.

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Lithium bottlenecks

“Benchmark’s view is that lithium, more than any other part of the supply chain, will be the bottleneck for the growth of the battery industry,” the new report says. While lithium mining is expected to crash through 1 million tonnes for the first time in 2023, Benchmark’s estimate for demand suggests that production needs to rise to 2.8 million tonnes by 2030.

Or to put it another way, Benchmark says more lithium will be needed in 2030 than was mined between 2015 and 2022.

Lithium prices have recently stabilised after falling 40 per cent from their peak late last year, and the demand picture continues to improve. Macquarie analysts said this week that global sales implied that EVs (both fully electric vehicles and hybrid EVs) would top 32 per cent this year.

“Over the medium to longer term, we expect China to match Europe in EV penetration rates by the end of this decade, followed by the US. The global EV penetration, which includes mild hybrid EVs, could exceed 60 per cent by 2030,” Macquarie says.

Of the investment required to fill the battery supply chain gap, $US220 billion is required for critical minerals development, with nickel the other big supply problem. Manufacturing the 3.7 terawatts of batteries Benchmark estimates will be required by 2030 (up from 1 terawatt today) will need $US201 billion of investment, with the remaining $US93 billion needed for mid-stream processing.

More investment needed

But Benchmark chief executive Simon Moores says the industry needs to think carefully – and in a much more co-ordinated way – about the timeline for investment.

“A gigafactory can be built in two to five years. A refinery can be built in two. But the mines needed upstream of them take between five and 25 years to develop. So even though gigafactories require the largest amount of investment, it is imperative that investment is made now in the mines.”

Benchmark acknowledges that its $US561 billion estimate could prove too low if we see countries develop regional supply chains that go around China’s dominant battery production industry.

On Tuesday, Mike Henry also warned of the dangers of nationalism in critical minerals:

“This is an understandable reaction to the growing appreciation for the indispensable nature of these critical minerals and to concerns about the magnitude of the challenge that needs to be met in terms of new supply.

“But governments striving to secure their own critical mineral supplies must ensure they don’t undermine the outcome the world needs to achieve – where in fact a combination of pragmatic international co-operation and competition can jointly accelerate the energy transition.”

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James Thomson is senior Chanticleer columnist based in Melbourne. He was the Companies editor and editor of BRW Magazine. Connect with James on Twitter. Email James at j.thomson@copyright link