With the demand for electric vehicles (EV) and energy storage solutions steeply on the rise, the global need for batteries is not relenting anytime soon. As a result, the demand for battery raw materials, specifically lithium, nickel, and cobalt, necessary for the development of these energy repositories, is all set to skyrocket. This uptick in consumption of raw material, induced by an escalating battery demand, has given rise to concerns from industry analysts who are foreseeing a supply cliff situation.
Battery factories or “gigafactories” are being rapidly constructed to address the burgeoning need for environmentally-friendly, efficient batteries. As per the data provided by Benchmark Mineral Intelligence (BMI), at the start of 2020, there were around 70 lithium-ion battery ‘gigafactories’ in the pipeline worldwide. It is projected that by 2029, these gigafactories will demand more than 1.7 million tonnes of lithium, 1.3 million tonnes of nickel and 430,000 tonnes of cobalt.
But why is securing supply for these raw materials becoming an issue? The reasons lie in the multi-fold challenges posed by the industry dynamics and logistics including geographical sourcing, environmental concerns, inconsistent policies, and investment ventures, which together are concocting a complex recipe for a potential supply cliff.
Lithium, nickel, and cobalt – the essential ingredients of battery manufacture – are primarily procured from regions such as Australia, Africa, and South America. Extracting these resources involves time-consuming processes, substantial investments, and robust infrastructural facilities. Furthermore, the market is also experiencing a delay due to inconsistent government policies and regulatory hurdles that tend to discourage investment in this sector.
Beyond logistics, environmental concerns are emerging as a significant factor conflicting with supply. The mining processes involved in the extraction of these raw materials are not devoid of their ecological impact. This environmental strain poses a challenge to meet extraction rates without compromising the health of our planet.
A crucial factor preventing a smooth continuity in the supply chain is the investment gap. Investors typically favor a quick return, but the battery materials supply chain involves a gestation period of years. The lengthy and complex journey from exploration to extraction and finally to battery production is not enticing for the financial backers who are keen on short-term returns.
Additionally, the influence of the gigafactories themselves must not be understated. These mega-producers exert substantial pressure on the supply chain with their extraordinary demand – a demand that is expected to escalate in the coming years. By failing to secure long-term supply through direct agreements with producers, these gigafactories may face scarcity in raw material supplies if the projected supply cliff becomes a reality.
Is a solution in sight to avert a possible supply cliff situation? Presently, numerous industry players are exploring alternatives to the current battery chemistry (lithium, nickel, cobalt) to mitigate the impending supply concerns. For instance, there has been promising research in solid-state batteries and lithium-air batteries, which could potentially circumvent the need for scarce raw materials. Moreover, recycling batteries could become a game-changer by providing a sustainable source of precious raw materials.
To ensure uninterrupted supply amidst surging demand, holistic strategies – spanning from intensifying exploration activities, streamlining regulatory framework, promoting environmental-friendly extraction methods, fostering long-term investments to encouraging research in alternative battery technologies – need to be devised without delay. Meanwhile, consumers and stakeholders worldwide await with bated breath to see how this chapter in the battery revolution story unfolds.