Insights

Battery critical metals are essential components of various energy storage technologies, including lithium-ion batteries used in electric vehicles and renewable energy systems.  Some of the critical metals required for battery production include lithium, cobalt, nickel and rare earth elements. The main issue with critical metals for the energy transition lies in their limited availability, uncertain supply chains, and potential environmental and social impacts associated with their extraction and processing.  

Let's explore into some of the challenges in more details:

•  Limited Reserves - Many critical metals are relatively scarce in nature, and their reserves might not be sufficient to meet rapidly growing demand for clean energy technologies.  With new mines taking up to 10 years to start production, the demand will quickly outweigh the supply. This scarcity combined with the increasing demand will lead to price volatility and supply chain distruptions.

• Geopolitical Dependence - A significant portion of the world's critical metal reserves and production is concentrated in a few countires, often with unstable geopolitical situations.  This dependency creates concerns around the security of supply and can lead to vulnerability in case of trade restrictions or conflicts.  We only have to look at the impact of the Indonesia nickel ore export ban in 2020 to understand this challenge.  With Indonesia being the home to over 20% of the world's nickel reserves, this export ban caused major shifts in the supply chains.

• Environmental and Social Concerns - The extraction and processing of critical metals can have significant environmental and social impacts, such as deforestation, habitat destruction, water pollution, and human rights violations.  Ethical and sustainable sourcing of these metals is essential to avoid contributing to environmental degradation and human rights violations. Back in 2016 Amnesty International released a report entitled 'This is what we die for.'  This report raised issues around human rights violations such as child labour in the DRC cobalt supply chain.  With more than half of the worlds Cobalt supply coming from the area, this raised serious concerns around the viability of the EV transition.

• Complex Supply Chains - Critical metals often have complex supply chains, involving multiple countries, which can be difficult to trace and monitor.  This complexity makes it challenging to ensure responsible and ethical sourcing through the supply chain.  It is normal in the industry for critical metals to be handled at least 3 times, often in different countries before they even make it into a battery cell (1. The Mine, 2. The Refiner, 3. The Cathode Active Material manufacturer).

• Recycling Challenges - While recycling can help mitigate the demand for newly mined critical metals, it is often technically chellenging and only economically viable for certain metals and in specific applications.  Developing efficient recycling technologies and establishing recycling infrastructure is crucial to maximize the reuse of critical metals.

With all these challenges, what can we do to secure supply chains for the energy transition.  Here are some options:

• Diversification of Supply Sources - reducing dependency on a single country or region for critial metals is vital to ensure a stable supply chain.  Take a look at Europe.  Actively seeking to identify and develop alternative sources of these metals within its borders and through partnerships with other countries.

• Investment in Mining, Refining and Recycling - investing in mining and refining projects and promoting the recycling of batteries can help stablise the supply chain and even reduce the reliance on imports. Enhanced recycling technologies can recover valuable metals from used batteries and other electronic waste, thereby creating a more sustainable supply chain.

• Strategic Stockpiling - Establishing strategic stockpiles of critical metals can act as a buffer during times of supply distruption.  This apporach helps ensure continuous supply even in times of global market fluctuations.

• Responsible sourcing - Implementing strict environmental and ethical standards for mining and processing critical metals to mitigate their negative impacts.

Addressing these issues is crucial to ensure a smooth and successful energy transition toward a more sustainable and low-carbon future.  Reach out to discuss how Supply Tactics can help secure your critical metals supply chain.