Reminiscent of FDR plan, except battery factories and mines Metal Tech News Weekly Edition – July 1, 2020
In addition to dealing a major blow to the economy, the COVID-19 pandemic has shined a spotlight on a chink in the United States' economic and security armor – an overreliance on foreign countries for the minerals and metals that lie at the frontend of American supply chains.
"The COVID-19 pandemic has shown how delicate our supply chains are and that should be a wakeup call for all of us," Senate Committee on Energy & Natural Resources Chair Lisa Murkowski, R-Alaska, said during a June 24 hearing on the impact of COVID-19 on American supply chains.
Benchmark Mineral Intelligence Managing Director Simon Moores floated an idea that addresses both the economic impacts of COVID-19 and the supply chain vulnerabilities revealed by the pandemic – invest in a complete mines-to-lithium-ion-batteries supply chain in the U.S., during video testimony before the committee.
Reminiscent of President Franklin D. Roosevelt's New Deal to pull the U.S. out of the Great Depression, the global lithium-ion battery expert's idea is to build the infrastructure America needs as it continues into the 21st century.
"Instead of dams, you need to build battery megafactories in their multiples. Instead of highways, bridges and tunnels, you need to build the supply chains to enable these megafactories to operate securely and consistently," he said. "These include the cathode and anode plants, and the lithium, cobalt, graphite, nickel and manganese sources to feed them."
Moores is not suggesting minor incentives to gradually build out domestic battery infrastructure, telling the senators that this investment in the lithium-ion supply chain "has to be done at a speed, scale, and quality that will make most of U.S. corporations uncomfortable."
Retooling for the 21st century
The reasoning behind Moores' belief that the U.S. needs to make uncomfortably large investments into a domestic lithium-ion battery supply chain is America has fallen way behind in developing this technology that is powering the future of transportation and energy.
"Lithium-ion batteries are a core platform technology for the 21st century," he said.
These rechargeable batteries are what is powering the growing number of electric vehicles traveling global highways, a plethora of cordless tools and electronics, and are being deployed on a massive scale to store electricity generated by wind and photovoltaic solar to deliver to utility grids as needed.
The global number of gigafactories being developed to produce the lithium-ion batteries needed to meet the demand of these applications has grown significantly over the past 2.5 years, from 17 to 142.
Most of these new battery megafactories are being built in China, which accounts for 107 of the total and includes 53 currently in production.
The U.S., on the other hand, has nine gigafactories in the pipeline and only three in production.
Breaking this down, Moores said, "China is building the equivalent of one battery megafactory a week, the USA one every four months.
European countries are also investing heavily in bolstering the production of lithium-ion batteries, a strategy that is expected to boost the European Union above the U.S. before the end of the decade.
Currently, China produces roughly 73% of the world's lithium-ion batteries. The U.S. at 10%, and Europe at 6%, produce most of the balance.
Based on current projections that include recent investments by Europe, Benchmark Minerals forecasts that China will produce 70% of the lithium-ion batteries in 2029, while Europe's share rockets to 16% and U.S. production drops to 9%.
While companies like Tesla, General Motors and LG Chem are investing heavily into individual efforts to produce lithium-ion batteries in America, Moores said the U.S. lacks an encompassing plan to meet the needs of the rapidly changing energy landscape.
The lithium-ion battery expert believes the COVID-19 pandemic offers an ideal opportunity for the U.S. to retool itself for the 21st century.
"When was the last time the USA built a heavy industry from scratch?" he queried in a written testimony delivered to the Senate Natural Resource Committee.
Answering his own question, Moores wrote "FDR's New Deal built the core infrastructure that the USA still relies on today."
Beyond just building battery factories, Moores contends the U.S. should invest in the mines needed to supply the minerals and metals that make lithium-ion batteries possible.
This echoes a message Murkowski has been delivering for more than a decade.
"There is no denying that our nation has, and will continue to have, significant minerals needs, including and especially for clean energy technology," the Alaska senator said during the June 24 hearing. "The World Bank released a report last month estimating the demand for lithium, graphite, and cobalt will increase 500% by 2050 to meet clean energy demand."
The World Bank report referenced by Murkowski estimates that more than 3 billion tons of minerals and metals will be needed to deploy the wind, solar and geothermal power, as well as energy storage, required to meet carbon reduction goals outlined in the 2015 Paris Agreement.
Further details of the World Bank report, "Minerals for Climate Action: The Mineral Intensity of the Clean Energy Transition," can be read in All clean energy paths lead to mining in the May 13 edition of Metal Tech News.
According to a recent report by the U.S. Geological Survey, America relies on foreign countries to supply more than 50% of its needs for 31 minerals and metals including 100 percent import-reliant for 14 of them.
"There are a host of minerals that almost no one can name that are critical to our economy, our security, our competitiveness, and our health. Many come from places that we would be hard-pressed to find on a map and the rest come from the one place that we have no difficulty finding, and that is China," Murkowski said.
Nedal Nassar, section chief at the USGS National Minerals Information Center bolstered the senator's statement, testifying that "China is the largest producer of most high-supply risk commodities."
"For commodities which China does not have sufficient domestic resources, such as cobalt and niobium, Chinese firms have sought to secure supplies through foreign investments in mineral assets worldwide," he added.
When it comes to the ingredients that go into lithium-ion batteries, the U.S. is 100% import-reliant for mined graphite and manganese, 78% for cobalt, 47% for nickel, and around 25% for lithium.
As gigafactories go up around the globe, so will the need and competition for these materials.
According to forecasts by Benchmark Mineral Intelligence, a global leader in the lithium-ion battery markets, by 2029 the demand for nickel will double, cobalt will triple, flake graphite will quadruple, and lithium will expand by more than six-fold.
"The tectonic plates of the industry have shifted," said Moores.
Luck not a good strategy
While Murkowski and others have been sounding the alarm on America's overreliance on foreign sources of critical minerals long before COVID-19, supply disruptions from closed borders and temporary mine closures due the pandemic have underscored this vulnerability.
The Alaska senator said "we have just been lucky" that the global metals supply chain that the United States relies so heavily on was not more heavily impacted by COVID-19.
"Luck usually isn't a very good strategy," she added.
Especially when China is employing a global strategy to secure the minerals and metals at the frontend of global manufacturing supply chains.
"China's growing control over many basic materials, and its history of using that control as leverage for its own economic and political goals, makes this a cause of concern," said Thomas Duesterberg, senior fellow at the Hudson Institute.
In response to Murkowski's question about the potential impacts of China halting the supply of critical minerals to the U.S., Duesterberg predicted the consequences would be "disastrous for the U.S. economy" – especially for the computer, auto, and commercial aviation sectors.
Fortunately, the U.S. has rich domestic deposits of most of the minerals and metals critical to America's economy and security, including those needed for lithium-ion batteries.
Lawmakers on Capitol Hill have introduced multiple pieces of legislation aimed at increasing the domestic production of these mined materials, including the American Minerals Security Act, introduced by Murkowski and Sen. Joe Manchin, D-W. Va., in February; and the Onshoring Rare Earths Act of 2020, or ORE Act, introduced by Sen. Ted Cruz, R-Texas, in May.
More information on the American Minerals Security Act can be read at Energy legislation stalls in US Senate published in the March 18 edition of Metal Tech News; and further details on the ORE Act can be read at ORE Act encourages more than rare earths in the May 20 edition of Metal Tech News.
In addition to the legislation already in play, Moores believes the U.S. should consider a major New Battery Deal that will help America keep pace with China and Europe in the race for lithium-ion battery supremacy.
"Those who invest in battery capacity and supply chains today are likely to dominate this industry for generations to come," he said. "It is not too late for the U.S., but action is needed now."
"I would like to thank Sen. Murkowski, who's leadership on this subject over the years has been crucial and relentless," Moores added. "The industry is listening."