What the Ford Model T can teach us about a circular economy Metal Tech News – June 21, 2023
Back in 1908, when Ford Motor Company first started cranking out the Model T, the innovative automaker championed new materials, new engineering designs, and new manufacturing practices. More than a century later, automotive companies are emulating Henry Ford's strategy as they tackle the supply chain challenges of a similarly groundbreaking electric vehicle revolution.
Styled these days as 'vertical integration production,' Henry Ford's idea of "a continuous, nonstop process from raw material to finished product, with no pause even for warehousing or storage" is coming full circle in this new era of low-carbon technologies and circular economics.
To meet demand between 1917 and 1928, Ford developed the Rouge complex a few miles south of Detroit, where the Rouge and Detroit Rivers met, supporting yet another idea ahead of its time –autonomy through control of every aspect of production from raw materials to finished product.
Through the years, the complex supported an array of independent production facilities, including steel mills, tire and glass factories, a power plant and a reception depot for coal, iron, and lumber.
By the 1930s, one new Ford car rolled off the assembly line at Rogue every 49 seconds and markedly helped to urbanize the world.
Today, automakers are finding themselves in a similar position as Henry Ford in 1908, with inadequate supply chains to support a revolutionary new mode of transportation.
Despite the 2015 carbon reduction imperative of the Paris Agreement on climate change and the ever-expanding critical minerals list, mining industry's major players have taken a conservative approach to investing in new battery metal projects. This delay in joining the global push toward time-sensitive net-zero goals doesn't take into account that new mines require decades to establish commercial viability.
The mining industry's reluctance to invest in the energy transition has only served to exacerbate supply shortages and high prices for minerals like lithium and cobalt, focusing on shareholder returns over risky new mines and exploration.
This has pushed automakers – and surprisingly even the oil giants themselves – to finance extensive new research in battery chemistries and make their own heavy investments in mineral acquisition.
Major automakers from the US and Europe, including Ford, have been investing billions directly into mines and exploration projects to secure supply, encouraged by various new government policies and funding supporting the global energy transition.
"That's good. You don't want prices to go higher and higher and higher," said Ken Hoffman, global co-leader for the EV battery materials group at McKinsey & Company. "You want good pricing. You don't want ever higher pricing. And that's really important for the industry."
Despite the efforts, the prices for battery metals like cobalt and lithium have fluctuated wildly as investors, automakers, and mining companies try to find balance.
Cobalt, largely a byproduct of nickel and copper mining operations, is primarily produced in the Democratic Republic of Congo. The labor and environmental issues in DRC, however, make this critical battery metal particularly troublesome for the automotive sector.
Additional access restriction to non-Russian cobalt during the Ukraine invasion has also factored into price increases and supply chain difficulties. While the price has dropped this year, it still stands above historical norms, maintaining strong motivation for battery makers to continue to decrease consumption.
Cobalt is also difficult to extract and more expensive compared to nickel and lithium, which is one of the main reasons industry leaders such as Tesla are "committed to cobalt-free batteries" that are more nickel-rich, according to Jay Hwang, a senior analyst at S&P Global Mobility.
However, nickel replacing cobalt would then require large amounts of the less readily available Class 1 quality of the metal, requiring refinement of Class 2 feed, which is energy and carbon-intensive.
"We may need seven to 10 million tons of nickel produced per year," said Gerbrand Ceder, senior scientist in materials sciences at the Lawrence Berkeley National Laboratory.
Over the past few years, there has finally been a pickup in exploration spending for critical and in-demand minerals by mining companies of all sizes.
This includes diversified mining giant Rio Tinto Group and Talon Metals partnering up to offer low-carbon nickel, and Rio Tinto developing the Salar del Rincon lithium project in Argentina while maintaining a hopeful outlook on the troubled Jadar lithium project in Serbia amidst opposition from environmental groups.
Market analysts expect further increases in mineral exploration and development spending as automakers increase investments in securing supplies of the metals needed to build EVs.
"I don't think you can really ignore it for much longer," said Chris Berry, an independent analyst and president of House Mountain Partners, which focuses on critical minerals. "I think you're likely to see the [original equipment manufacturers] and the battery manufacturers really fund the lithium market, first, before you see larger mining companies get involved."
This incursion is already underway with automakers backing new lithium supply through upstream partnerships such as General Motors' recent record-breaking $650 million investment in Lithium Americas Corp.'s Thacker Pass lithium project in Nevada, and Tesla's upcoming lithium refinery in Texas.
"I don't think there's ever going to be one solution that's going to solve the problem. It's going to be a long period of juggling multiple problems and just trying to find the right balance between multiple solutions," said Caspar Rawles, Benchmark Mineral Intelligence's chief data officer. "Certainly, people alive today have never really seen anything like this. Not only are year-over-year demand growth rates very, very high [...] for some minerals – but that's going to go on for the next decade and beyond."
A look back at how Henry Ford went from the first Model T in 1908 to rolling a new Ford car off the assembly line every 49 seconds in the 1930s may provide some clues on how to manage critical mineral supply chains for a revolutionary shift in transportation.
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