U.S. Lawmakers Are Supporting a Electric Vehicle Supply Chain Policy to Help Secure Raw Materials for EV Batteries
As more electric vehicles enter the market from global automakers, there are concerns about securing an ample supply of raw materials, including cobalt and lithium used in EV battery cell production.
On Tuesday, U.S. lawmakers moved closer to developing a national electric vehicle supply chain policy, with senators voicing bipartisan support for legislation designed to counter China's dominance in metals production and EV battery manufacturing. The primary goal of the policy is to try and calculate U.S. reserves of the raws materials for EV battery production.
"We are not doing ourselves any favors when we don't know what we have in our inventory," Murkowski, an Alaska Republican, said at the hearing, which was streamed via webcast. "I suspect we have more than we even think we do."
The Senate's Energy and Natural Resources Committee held a hearing on the American Mineral Security Act of 2015, a bill designed identifying mineral market factors to help avoid supply shortages, mitigate price volatility, and prepare for demand growth.
The act is also designed to help streamline regulation and permitting requirements for the development of new mines for lithium, graphite and other EV minerals.
Over the past two years, cobalt and lithium have become a valuable commodities for the automotive industry, mainly for its use in battery packs for electric and plug-in hybrid vehicles.
With rising demand for cobalt, the price has more than doubled. This has led to concerns from global automakers, including those in Germany, about securing enough of it for their future electric vehicle needs.
With demand rising, the spot price of cobalt in the U.S. has risen from $12 per pound in 2016 to $38 in 2018, according to data from Statista.
China Controls Half of the World's Lithium Production
China has been quietly cornering the global lithium market, making deals in Asia, Chile, and Argentina as it seeks to lock in access to a strategic resource that could power the next energy revolution. China is already the world's leader in electric vehicle production and its lead is expected to grow, as financial incentives and regulations promote the adoption of EVs.
According to Reuters, China has invested $4.2 billion in South America in the past two years, surpassing the value of similar deals by Japanese and South Korean companies in the same period. Chinese entities now control nearly half of global lithium production and 60 percent of electric battery production capacity.
"China has a huge head start," said Gavin Montgomery, a battery and mining analyst at the Wood Mackenzie consultancy. "They've just been at this a lot longer than the rest of the world."
The bipartisan legislation, sponsored by U.S. senators Lisa Murkowski, Joe Manchin and others, seeks in part to codify a late 2017 executive order on U.S. mineral development by President Trump.
Trump Administration officials from the Interior and Energy departments voiced support for the pending legislation.
"We are committed to producing domestically sourced minerals," Joe Balash, assistant secretary for land and minerals management at the Interior Department, said at the hearing.
In 2018, China's Tianqi Lithium Corp invested $4 billion in this lithium mine in Chile. (Photo: Reuters)
Just how much cobalt and other minerals used to make EVs are actually in the United States is unknown, as the U.S. has not conducted any meaningful national surveys.
United States Geological Survey (USGS) data shows that the United States has 35,000 tons of lithium in reserve, a figure that the agency and industry executives see as conservative.
Albemarle Corp (ALB.N) operates the only U.S. lithium mine in North Carolina, a facility with the capacity to produce about 6,000 tons annually. Based on current USGS data, that means that one mine could potentially deplete U.S. reserves within six years.
Idaho-based eCobalt Solutions Inc aims to produce 1,500 tons per year of cobalt once its project opens in the state. However that's enough of the metal to make only about 300,000 EVs.
Several more lithium projects are under development across the U.S., including those from ioneer Ltd (INR), Lithium Americas Corp and Piedmont Lithium Ltd. Each project aims to produce at least 20,000 tons of lithium per year, according to corporate presentations.
Lack of Lithium Processing Facilities in the U.S.
For the U.S., mining cobalt and lithium is not enough, as the materials still need to be processed. However, concerns about the lack of U.S. processing facilities are a growing concern.
China currently controls about 85 percent of the globe's cobalt sulfate processing, according to research firm WoodMac. Cobalt sulfate is the final product of the metal used in lithium ion batteries.
"The fact that China maintains a near monopoly on the critical minerals needed for our defense system makes no sense at all," said Manchin, a West Virginia Democrat.
The United States is also reliant on China for rare earth processing, a group of 17 elements including neodymium, which is used to make electric vehicles and consumer electronics.
U.S. Companies Must Now Pay a 25% Tariff to Process Raw Materials
With the ongoing trade dispute between the U.S. and China, higher tariffs on export to China will hurt U.S. mining companies. U.S. companies now have to pay steep tariffs to ship rare earth Materials for processing in China.
For example, California's Mountain Pass mine, owned by MP Materials, must pay a 25% tariff to ship rare earths it extracts from its California mine to China for final processing. It's another example of the collateral damage caused by the ongoing U.S.-China trade war.
"All we seek is a level playing field to compete as a low-cost producer so we can help establish an EV supply chain in the United States," said James Litinsky, co-chairman of MP Materials.
Securing a supply chain for electric vehicle materials might not enough in today's global economy as China is already taking the steps to support EV production in the country, the world's biggest auto market.
While the supply chain policy is a start, the U.S. must secure and maintain favorable trade deals to support the auto industry, something that Trump's trade war is making increasingly difficult.
- Softbank Leads $500 Million Investment in Didi Chuxing’s Autonomous Driving Subsidiary
- How Mercedes Benz is Keeping Drivers Safe Using ‘Car-to-X’ Communication Technology
- China’s Baidu Completes its ‘Apollo Park’, the World’s Largest Autonomous Driving & Intelligent Vehicle Testing Site
- Tesla is Cutting its Vehicle Prices in North America & China, Model 3 Now Starts at $37,990 in the U.S.
- Continental Signs Agreement With Pioneer to Develop an Integrated High-Performance Vehicle Cockpit
- Pony.ai Given Green Light to Carry Passengers in its Robotaxis in China
- Just Days After Reopening, Ford Motor Co Temporarily Closes 2 Assembly Plants
- CEO of Intel-Owned Mobileye Expects a Big Consolidation of Autonomous Driving Technology