Following up on August 7's "Hundreds of new mines required to meet 2030 battery metals demand — IEA report".
From Palladium Magazine, August 8:
In the aftermath of the humiliating Yom Kippur War, the Arab nations decided the time was finally right to deploy its most powerful weapon: oil. In 1973, Saudi Arabia had just replaced the U.S. as the world’s oil producer of last resort, which meant that even at 100% production capacity, the U.S. would be powerless to replace Saudi Arabian supply in the event it was cut off. OPEC announced an oil embargo on supporters of Israel in the October of that year, and the energy world would never be the same again.
The ensuing shortages and rationing led Western nations, especially the U.S., to ramp up production. President Richard Nixon launched Project Independence, an initiative that called for the United States to achieve energy independence by developing alternative energy sources and building 1,000 nuclear power plants. The initiative failed as fears surrounding nuclear energy grew and renewable energy technology of the time proved inefficient. However, it led to the creation of the Department of Energy and funding of the research that was essential to the development of our modern renewable energy systems. Its fruits include electric vehicle batteries and the fracking technology that enabled the U.S. to beat OPEC, helping it reclaim its crown as the largest producer of oil and gas in the world. Today, the US accounts for 20 percent of global output and is a net exporter. Oil is a valuable weapon, but one that can backfire on those who use it.
The Ukraine War is resulting in the biggest shock to the global energy system since the 1973 crisis. Two changes are already evident: The first is that Russian gas is being replaced as quickly as possible with liquified natural gas (LNG), supplied primarily by the U.S., Australia, and Qatar. The second is an acceleration of the transition to clean energy, mainly wind and solar, as no Western country has reintroduced nuclear energy at scale.
These changes will permanently alter the map of our energy economy. But they suffer from one major limiting factor: the mineral inputs are increasingly expensive and increasingly unavailable. Solar and wind require a roughly tenfold increase in the tonnage of mineral inputs compared to a natural gas plant delivering the same amount of energy. Other parts of the electrification of our economy are similarly mineral-intensive; EVs require six times as many mineral inputs as a traditional car.
The green energy transition is, in reality, an electrification transition. Electrification requires hardware, and hardware requires mines. Some of the minerals critical for electrification include copper, nickel, cobalt, lithium, rare earth elements (REE), graphite, and polysilicon. Of these, copper and lithium are the most important. Copper has been called the “metal of electrification” because it is needed in everything associated with the transition to clean energy and electric vehicles. Lithium has earned the nickname “white gold” because it is needed for the lithium-ion batteries that are used for the grid-stabilizing energy storage, and to power Tesla cars and iPhones.
Commodity materials account for up to 70 percent of the cost to produce an EV battery. In turn, nearly one-third of an EV’s total cost is the cost of its battery. The same holds true for solar modules, with 70 percent of their cost coming from minerals. Wind turbines are in a similar situation. The IEA estimates that achieving net zero emissions globally by 2040 would require six times the amount of mineral inputs we currently use, and that the annual critical mineral demand from clean energy technologies will reach more than $400 billion by 2050.
But the chances of meeting those targets at all look slim. An analysis by the energy consulting firm Wood Mackenzie found that if EVs accounted for two-thirds of new car purchases by 2030, it would require dozens of new mines that are the size of the world’s largest in each key category. These mines are not currently being planned. And per the IEA, it takes an average of 16 years from initial discovery to open a mine. That’s a supply gap that doesn’t look good for meeting the official targets.
There is no escaping the fact that extracting and refining natural resources is going to remain the basis on which all industrial societies must be built. And control over these resources means political power; as Henry Kissinger once said, “Control oil and you control nations.” To the degree that governments embrace electrification, minerals become the new oil.
This is a problem for the U.S. Unlike oil and gas, the U.S. is currently at a disadvantage in trying to control these resources. The U.S. started the lithium industry and ranks among the top five in known reserves, but only produces about one percent of the world’s output. More than 80 percent of the world’s lithium is mined in Australia, China, and Chile. China also controls more than half the world’s lithium processing and 75 percent of its lithium-ion battery factories per the IEA. With copper demand expected to double by 2035, the U.S. is projected to need to import 70 percent of its supply. This will compound the U.S.’s energy dependence problem—80 percent of its rare earth metals are already sourced from China, and nearly 100 percent of them are processed there.
And so on down the line: there are 35 minerals that have been identified by the Department of Defense as being critical to national security. Of these, the U.S. had a 100 percent import reliance for 14 minerals and an additional 14 had a greater than 50 percent import reliance in 2020.
China, meanwhile, is dominating the minerals world on all fronts: mining, refining, and production of advanced technologies. China accounts for 80 percent of the global supply chain of solar technology and is projected to grow this share to 95 percent by 2025.
China’s Grand Prize
Chinese control over the metals that are set to power our future did not happen by accident. Under China’s “Military-Civil Fusion” concept, all businesses must tolerate interference in a way that would be illegal in the West. This allows China to execute long-term strategic plans combining state resources and capabilities combined with ostensibly private businesses....
....MUCH MORE
