Emerging markets are taking steps to position themselves in the global value chain for EVs, with several recent projects focused on the decentralised production of batteries for electric vehicles (EVs). At the same time, however, these industrial developments highlight the carbon-intensive nature of extracting the materials needed to produce EVs, though hopes remain that the process can be further decarbonised.
Lithium
Alongside cobalt, manganese, nickel and graphite, lithium is a crucial component in EV batteries. The average unit contains around eight kg of lithium, and increasing global consumer appetite for EVs has led to a sharp rise in interest for the material. In 2022 around 60% of total demand came from EV batteries, up from just 15% in 2017.
Emerging markets with lithium deposits are reacting swiftly to this jump in demand. In August 2023 the government proposed the green minerals policy, which includes a framework to foster lithium investment, exploration and production. While the relevant legislation is expected to be passed by the end of 2023, Ghana’s sovereign wealth fund, the Minerals Income Investment Fund (MIIF), has already invested $33m in Atlantic Lithium, in line with the company’s development of the Ewoyaa Lithium Project, West Africa’s first lithium mine. This is alongside its September 2023 purchase of a 6% stake in Atlantic Lithium’s projects in Ghana, which include the Ewoyaa Lithium Project, aiming to fund further exploration and production activities. It is estimated that Ghana could gain $4.8bn from the Ewoyaa deposit alone.
Strategic policy moves could provide additional value to countries’ lithium-related earnings, according to Ghana’s Institute of Energy Security. By processing raw materials for EV batteries such as lithium before export, mineral-exporting countries could gain additional revenue from value-added production. Such moves to climb the lithium value chain through onshore processing of minerals have already been implemented by Indonesia and Chile, and could shift the dynamics of global value chains in the lithium segment in the coming years.
Supply Chain Shift
The world’s two-largest producers of EV batteries announced significant projects in Indonesia in April 2022. Headed by LG Energy Solution – the second-largest EV battery maker in the world – a South Korean consortium is set to invest $9bn in a mines-to-manufacturing EV project in the country. The project covers every aspect of the battery production process, from smelting and refining nickel, to the assembly of the finished product, and is part of an ongoing effort to reduce reliance on Chinese EV battery suppliers. With some 80% of battery materials produced in China, the automotive industry’s shift to EVs has slowed due to supply chain issues in recent years.
Indonesia is in a strong position to take over some production from China, and it has been moving to position itself as a centre of EV battery manufacturing for some time. In September 2020 the country released its EV roadmap, which outlined plans to produce 600,000 four-wheeled EVs and 2.45m twowheeled EVs annually by 2030. In March of the following year four state-owned enterprises established the Indonesia Battery Corporation (IBC) to oversee the EV battery industry. Alongside local mining firm Aneka Tambang, the IBC is a local partner in the new development. April 2022 also saw the announcement of a $6bn agreement between China’s Contemporary Amperex Technology (CATL) – the world’s largest EV battery producer – and Indonesian mining firms ANTAM and IBI for a similar project.
Carbon Considerations
Indonesia holds around one-quarter of the world’s supply of nickel, a crucial component in EV batteries which itself accounts for some 35% of EV production costs. As has been the case for many other key global commodities, Russia’s ongoing invasion of Ukraine has impacted market dynamics for nickel. Russia produces around 11% of nickel worldwide, which has led prices to spike significantly since the invasion began in February 2022.
EV-related mining requirements highlight a paradoxical aspect of the automotive industry’s transition away from fossil fuels. A 2022 report produced by asset management firm LGIM and multinational mining company BHP concluded that the world will need to extract much greater quantities of key metals in order to limit global warming to 1.5°C above pre-industrial levels. According to the report, demand for nickel will quadruple by 2050 – with much of this demand associated with EVs.
Decarbonising Production
There are hopes, however, that the mining industry’s carbon footprint could be reduced, and with it the knock-on carbon footprint of EV producers. Mining multinationals – among them BHP, Glencore and Rio Tinto – have set carbon-neutral targets. A key element of their plans is the incorporation of EVs into mining operations. A poll conducted in 2021 by industry website Mining Technology found that a majority of respondents thought that increased use of battery-powered EVs would be the most effective way to reduce the mining sector’s carbon footprint. At present, depending on the site geography and the commodity being extracted, diesel-powered vehicles account for 30-80% of the total direct greenhouse gas emissions at mining sites, according to the International Council on Mining and Metals (ICMM).
An important consideration for the long-term sustainability of EVs is the impact of batteries – in terms of both production and disposal. The majority of EV batteries are manufactured in China, typically in older, fossil fuel-fired factories. It will therefore be important for newer projects to instead rely on renewable energy. Adequate disposal or recycling will also be a priority, the latter of which is included in the new CATL development.
The ICMM is working to address the challenge of the limited availability of alternatives to diesel-powered vehicles at mining sites. The ICMM’s Innovation for Cleaner, Safer Vehicles (ICSV) initiative, launched in October 2018, aims to accelerate the introduction of zero-emissions mining vehicles.
BHP’s Escondida mine in Chile is the world’s largest copper producer, and its fleet of 160 trucks is expected to be replaced by zero-emissions vehicles by 2033. The first trucks are due to arrive in late 2023. Meanwhile, Glencore is partnering with Swedish industrial group Epiroc to deliver 23 electric battery-powered machines for its Onaping Depth nickel and copper mine in Canada, one of the world’s first all-electric mines, due to launch in 2024. Elsewhere, Rio Tinto is working with equipment manufacturers Caterpillar and Komatsu to identify decarbonisation solutions for its iron ore mines in Pilbara, Australia.
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