Europe’s carmakers face raw material shortages for EV batteries – archyde

  • Car manufacturers are investing heavily in battery cell production
  • Investments in raw material extraction have lagged behind
  • Companies compete for supplies of lithium, nickel and cobalt

FRANKFURT, October 13 (Reuters) – Large automobile manufacturers such as Volkswagen (VOWG_p.DE), Daimler (DAIGn.DE) and Stellantis (STLA.MI) are fighting to secure the battery cell supply in Europe, but may face a greater challenge trying to to go electric – to find enough raw materials for batteries.

An inadequate supply of lithium, nickel, manganese or cobalt could slow the transition to electric vehicles (EVs), make these vehicles more expensive and put the profit margins of automakers at risk.

“A serious question arises as to whether supply can keep pace with demand across the battery supply chain,” said Daniel Harrison, auto analyst at Ultima Media.

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Until recently, Europe was seen as the battery race against dominant Asian manufacturers like CATL (300750.SZ) in China, South Korea’s LG Chem (051910.KS) and Japan’s Panasonic (6752.T), says Ilka von Dalwigk of EIT InnoEnergy, who has built up a company network funded by the European Union in the “European Battery Alliance”.

“Nobody saw that as a problem,” says von Dalwigk. “The idea was that we could import battery cells.”

But predictions by banks like UBS that electric vehicle sales would skyrocket in the next decade shook the political establishment and automakers, forcing a rethink in battery production.

LOTS OF BATTERY PLANTS

This was followed by EU funding programs worth billions and the announcement of large battery factories by car manufacturers and suppliers. Volkswagen alone is planning six battery plants in Europe, while Daimler will build four with partners.

Lately there have been announcements of battery cell factories in large quantities and EIT InnoEnergy now lists almost 50 planned projects in the EU.

If all of these plans become a reality, local production should meet demand by 2030. Around 640 gigawatt hours (GWh) would be available, enough for an average annual production of 13 million cars.

Ultima Media estimates global supply at 2,140 GWh and demand at 2,212 GWh by 2030.

Harrison from Ultima Media predicts that the six planned Volkswagen plants would enable the Wolfsburg-based company to cover around two thirds of its own battery requirements.

SUPPLY CHAIN ​​GAP

The problem lies with raw materials like lithium, nickel, manganese and cobalt.

Market experts from Benchmark Mineral Intelligence (BMI) speak of “the great raw material separation” – high investments in cell factories, but a lack of investments in raw material extraction.

Within a year, the price of lithium carbonate more than doubled, explains Caspar Rawles, Head of Price and Data Analysis at BMI.

For cobalt, where the largest deposits are in the Democratic Republic of the Congo and are sometimes mined under miserable working conditions, a price increase is also to be expected.

At the very beginning of the supply chain, it takes around seven years for new mines to be developed.

“Europe is not the only region that is raising its e-car targets and reducing CO2 emissions,” said Rawles.

A global race is under way.

The automotive industry is currently experiencing painful production stoppages due to the scarcity of semiconductors.

Some automobile manufacturers, including Volkswagen, are trying to secure the supply of raw materials with exclusive supply contracts.

So far, lithium has mainly come from Australia and Chile, cobalt from the Congo and graphite from China. The largest processors of cathode and anode material are also located there and in Japan.

But imports can become more expensive due to tariff increases in trade disputes and interrupted by logistics problems, as a recent tanker accident that blocked the Suez Canal showed.

And long journeys are bad for those who are concerned about making batteries with the lowest possible CO2 emissions.

HOMEMADE RESOURCES

One answer is investment in raw material extraction in Europe – lithium is particularly available.

The startup Vulcan Energy is working on obtaining lithium in a CO2-neutral manner from thermal water in the German Upper Rhine Plain and has already won Renault (RENA.PA) as a customer.

“We would need a lot of projects like Vulcan Energy – with one in every European country we would have the chance to build the supply chain in Europe,” says Harrison.

EIT InnoEnergy estimates that Europe could tap a quarter of the raw materials it needs by 2030 and is therefore working to raise more money that could trigger further investment.

Recycling is another option. But here, too, Europe lags far behind China.

For quality reasons, only 10 to 20% of the demand can currently be covered with recycled material, says von Dalwigk.

There is a risk that the transition to e-mobility will slow down, says Harrison.

He adds, however, that the European Commission and EU Member States need to take action – such as more subsidies for exploration of reserves and recycling – “because there is so much at stake, economically and environmentally”.

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Additional coverage by Nick Carey. Editing by Mark Potter

Our standards: The Thomson Reuters Trust Principles.

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Reference-www.nach-welt.com

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