Batteries, metals and a supercycle

The energy transition will require a bevy of metals — steel, aluminium, copper, lithium, nickel, cobalt, rare earths, silver and manganese — and the supply for most is constrained. Lithium is often at the centre of conversations, as are the deals that car companies are signing up with mining companies.

General Motors announced an equity investment of $650 million in Lithium Americas to develop the largest US lithium deposit in January. That could support production of up to 1 million electric vehicles (EVs). Production is expected to begin in the second half of 2026. Ford sealed a pact with Liontown Resources last year, which aims to build a mine in Australia.

Tesla had reportedly been weighing a takeover of Canadian metals miner Sigma Lithium, but chief executive officer Elon Musk said at the March 1 investor day earlier this week that the company is more focused on refining lithium. The EV major has broken ground on a proposed lithium refinery in Texas, and aims to start producing within a year.

Next.e.GO Mobile, a German maker of compact urban EVs, signed an agreement with commodity trading house Trafigura to source all its battery metals such as lithium, cobalt and copper as well as aluminium. The supply is expected to start in January 2024 and will run until January 2029 at least.

Lithium prices have softened this year, but the market balance is impacted by multiple developments.

The US is attempting to create a “critical minerals buyers club” with allies like the European Union and G7 countries to secure supplies and diversify sources.

India view

Securing battery metal supplies is not a big worry for Ola’s founder and CEO Bhavish Aggarwal. “In my conversations with lithium providers globally, people are falling head over heels for an Indian partner. Everybody wants access to the Indian market,” he said in an interview with BloombergNEF in New York. “Look at the potential — India is the third-largest automotive market in the world. We get so much inbound interest.”

Ola claims to be one of India’s largest consumers of lithium today. Its demand will increase as it adds electric cars to its portfolio of electric two-wheelers, and as its gigafactory starts production later this year. “We are developing our own core cell technology with a focus on lithium-ion among other cell chemistries. Our R&D efforts are focused on improving the energy density and fast charging speeds of lithium cells, and making cells work better in different climate conditions,” he said, adding that the company has filed for over 100 patents in core cell technology.

Mr Aggarwal is also expecting the free trade agreement with Australia to boost supplies of critical battery metals.

The recent discovery of lithium reserves in Jammu and Kashmir — estimated at 5.9 million metric tonnes — holds promise, though BNEF estimates it could take about 10 years for the cycle of prospecting, exploration, development and exploitation.

There is also the potential of alternative battery chemistries such as lithium-sulphur or sodium-ion, that can ease the demand pressure somewhat, but they are quite a distance away from widespread deployment. Batteries are critical for powering EVs, as well as for storing renewable energy generated when demand is not high.

Supercycle

The energy transition could lead to a supercycle for the metals and mining industry, according to BNEF, with the value and volume of demand for key metals expanding in multiples.

However, there will be kinks on the growth curve, with resource nationalism and policy shifts impacting supply and demand. The US, for instance, recently imposed a tariff of 200 per cent on all imports of Russian aluminium. South Korea announced its intention to reduce its reliance on China for key minerals such as lithium, nickel and cobalt, to 50 per cent by 2030 from the current level of 80 per cent. It would increase cooperation with 30 resource-rich countries to diversify importing countries.

The value of Indonesia’s nickel exports jumped after it forced buyers to set up refineries in the country. “It’s silly. We have the raw materials, but we sell it to be refined overseas then we import it back. Where did we leave our brain?” Bloomberg News quoted Investment Minister Bahlil Lahadalia as saying.

The Democratic Republic of Congo, meanwhile, is keen to position itself as a key source of green energy metals, and is looking for partners to invest in cobalt, tantalum, tin and lithium processing. Argentina was in the spotlight recently with China’s Chery group announcing its intention to invest $400 million to build a plant to produce EVs and lithium batteries.

The writer is New York-based senior editor – global policy for BloombergNEF, vgombar@bloomberg.net