Saeefar Rehman, associate director, energy and environment, Grant Thornton UK LLP asks whether the UK resources industry will be in a position to recycle the increase in batteries, following the 2040 petrol/diesal car sale ban…
The UK government has proposed a ban on the sale of conventional petrol and diesel cars in the UK from 2040, and to remove all emission producing cars from roads by 2050. A tall order, and one that faces multiple challenges.
The rise of electric vehicles is a fundamental part of that shift. Although the UK has seen an increasing number of new cars registered in the last six years, electric vehicles (EVs) represent only a small fraction of the 2.5m cars registered each year. The thought of replacing the UK’s 32m cars with all EVs will be of significant interest to the resources industry.
The rise of specialty commodities such as lithium, graphite and rare earth minerals in recent years is likely to gather further momentum, as a result of the demand for these raw materials to produce batteries.
Considering the average EV requires 25-50 kg of lithium for its batteries, we could be looking at demand of 1,600,000 tonnes of lithium in the UK alone by 2050.
Lithium spot prices alone have quadrupled in the last two years to around US$20,000 tonnes, due to its increased demand and perceived shortage of supply. Whilst identifying new sources of these metals and minerals will remain a key focus, the requirement and opportunities for recycling these commodities will also need to play a key role.
Considering the average EV requires 25-50 kg of lithium for its batteries, we could be looking at demand of 1,600,000 tonnes of lithium in the UK alone by 2050. New lithium mines will come on stream, more efficient battery technology will emerge, hydrogen-based fuel will advance and the lithium demand-supply gap will narrow.
However, current global lithium production of around 36,000 tonnes per annum, suggests a monumental supply deficit is looming. Whilst there is a race to find new deposits, and the US Geological Survey (USGS) estimates global lithium resources stand at around 47m tonnes, of which approximately one third are economically mineable reserves, the need to recycle what is produced is a key part of that, given the value that lithium will have due to shortage of supply.
Graphite is another critical commodity used in the production of EVs, with around 25–50 kg of graphite used in the anodes of batteries. Graphite as an investment case garnered much attention before the world turned to lithium.
The subsequent decline in interest for graphite has probably less to do with demand and more to do with the relative abundance of graphite (800m tonnes of resources). China’s dominance of battery-grade graphite production is making it difficult for smaller international players to gain traction.
Global annual production of graphite currently stands at around one million tonnes, and although demand is expected to rise in line with electric vehicle growth, it is expected that the supply side will keep up as the best quality new mines come on stream, and production in China ramps up.
The key question is therefore whether the resources industry in the UK will be in a position to take advantage of what will be a growing commodity gap, and support the required growth in batteries, through battery recycling.
However, this does not necessarily mean that the UK will be in a position to access that growth, for the UK to ensure security of supply it will need initiatives and developments that involve recycling.
Cobalt is perhaps the least spoken of battery-related commodity, but represents the current “pinch point” for EV technology, due to cobalt’s relative scarcity. The USGS estimates global production of cobalt at only 123,000 tonnes in 2016, with 25m tonnes of resources worldwide.
It is possible that the proliferation of EVs worldwide will consume most of the world’s current known cobalt resources, assuming that technology remains the same. However, a more likely outcome is that battery and EV technologies will continue to advance, to the extent that cobalt becomes a far less critical component, but there may be a lag in this happening, putting pressure on that supply.
The key question is therefore whether the resources industry in the UK will be in a position to take advantage of what will be a growing commodity gap, and support the required growth in batteries, through battery recycling. Certainly the technology is developing to more cost effectively recycle batteries on a large scale, and with the likely value of these increasing in the short to medium term then it is likely to be a prize worth chasing.