The production of electric vehicles (EVs) requires substantially larger quantities of minerals than internal combustion engine vehicles. Without these minerals, vehicle bodies and critical components such as engine magnets and batteries cannot be built. The needed minerals range from the widely recognizable aluminum, copper and silver, to the more esoteric cobalt, lithium and graphite. The rapid and continuing rise in EV production, as well as increasing use of many rare minerals in the production of other products such as aircrafts and consumer electronics, has focused attention on the availability of these metals.
Greater access to critical minerals will serve to ensure that the United States is able to achieve a future that is not entirely dependent on oil.
At present, U.S. industry is vulnerable to supply chain disruptions precipitated by shortages of numerous minerals. Disruptions may arise through foreign government actions, disproportionate market power by a corporation, internal strife in producer countries, natural disasters, or other causes. In extreme cases, mineral supply disruptions could require extremely costly and sub-optimal substitution efforts or even force manufacturers to halt production.
In an effort to ensure an adequate supply of critical minerals, the U.S. Department of the Interior (DOI) has recently intensified its efforts to work with industry and other stakeholders to avoid minerals shortages or supply disruptions. DOI’s first step has been to create a list of minerals deemed most “critical.” After this list is finalized, DOI will examine the various critical mineral supply chains to ascertain how U.S. policy can promote greater domestic production and enhance recycling and reprocessing. Ultimately, DOI will release a comprehensive plan with concrete steps to reduce this vulnerability. The positive news about this development is that smart public policy and redoubled industry supply chain management efforts should greatly ameliorate this growing strategic vulnerability.
Critical Minerals Supply and Demand
The primary threat to accessing automotive related critical minerals comes from foreign companies and countries restricting production for commercial or political reasons. With lithium, for example, China’s Tianqi Lithium is attempting to purchase a 32 percent stake in one of the world’s largest lithium producer (Chile’s Sociedad Quimica y Minera SA). If Tianqi succeeds in this bid, the two companies will control approximately 70 percent of global lithium supply. If this were to happen, Chinese battery manufacturers would have the ability to distort market prices and availability, and thus greatly reduce the competitiveness of American made batteries and EVs. Additionally, given the nature of China’s economic system, it is quite possible that if U.S.-China relations deteriorate sharply, Tianqi Lithium could be ordered by the Chinese government to manipulate the supply of lithium to advance Chinese state interests.
Increasing domestic exploration and production of critical minerals and promoting recycling and reprocessing are necessary to ensure automakers and technology developers have the resources they need to develop an advanced fuel vehicle transportation system.
A second threat to U.S. critical mineral access comes from global supply conditions and the lack of greater U.S. production and reprocessing facilities. Across the range of minerals, near-term and intermediate demand is expected to significantly outpace supply. Every EV needs magnets, microprocessors, and batteries, all of which are made with critical minerals. Some of the most important minerals include cobalt, graphite, lithium, manganese, and the rare earth elements dysprosium and neodymium. If one includes the demand for stationary power storage, wind turbines, cell phones, computers, and vehicle batteries, the consumption of these minerals could surge. In fact, Bloomberg New Energy Finance sees demand for Cobalt, for example, increasing as much as 30-fold between 2017 and 2030.
The global electric vehicle (EV) market should see considerable growth in the coming years. In 2017, approximately 197,000 EVs were sold in the United States. The U.S. Energy Information Administration projects EV sales to reach 1.4 million per year (or 7 percent of all light-duty vehicle sales) by 2025 and 10 percent of total sales by 2040. All of these vehicles require multiple minerals. Moreover, the United States will have to compete for the global supply of these minerals in a world where EV sales and consumer electronics also are rising sharply outside the country.
The International Energy Agency estimates that annual global EV production will reach at least 40 million vehicles by 2040. Other private sector 2040 forecasts anticipate even greater levels of EV adoption and are as follows:
- Exxon Mobil: 100 million vehicles;
- BHP Billiton: 140 million vehicles (by 2035);
- Organization of Petroleum Exporting Counties: 266 million vehicles;
- BP: 320 million vehicles; and
- Bloomberg New Energy Finance: 530 million vehicles.
Greater access to critical minerals will serve to ensure that the United States is able to achieve a future that is not entirely dependent on oil, as so many of these minerals are a prerequisite to EV and battery production. In order to facilitate the transition to a more energy efficient and secure transportation system, the U.S. vulnerability to critical mineral supply disruptions must be reduced. Increasing domestic exploration and production of critical minerals and promoting recycling and reprocessing are necessary to ensure automakers and technology developers have the resources they need to develop an advanced fuel vehicle transportation system. Prompt and prudent government action, such as that being undertaken by the DOI, can be very helpful in achieving this goal.