A Reality Check About Supply Chain of Lithium-Ion Batteries | Fayaz Ahmed, Founder & Chief Analyst, Sustainable Energy & Blockchain Solutions (SEB’S)

There are different types of batteries but Lithium-ion batteries are the most popular batteries playing an important role in battery revolution. Lithium-ion batteries have many advantages over other types of batteries existing on the market. Lithium-ion batteries can be discharged more deeply and have high energy densities than lead acid batteries. For these reasons, Lithium-ion batteries are preferred for a number of commercial applications. Let’s start from our homes, 10 years ago we had one lithium battery in our home, today we have more than 10 for sure. We have lithium batteries in our shaver, toothbrush, speakers, electric toys, and so on.

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Fayaz Ahmed, Founder & Chief Analyst, Sustainable Energy & Blockchain Solutions (SEB’S)

A Lithium-ion cell is made of three main successive layers, two metallic current collectors and an electrolyte sandwiched in between to facilitate the movement of ions between current collectors. Bottom line, a Lithium-ion cell is a complex object made of many chemicals elements, ranging from metals and non-metals to polymer and organic solvents. Some of the metals required to make up Lithium-ion cell could be rare, such as cobalt, it should be noted that a lithium-ion battery usually doesn’t include any rare earths such as niobium, tellurium. Second, it should be noted that lithium-ion is a broad family made of various sub-chemistries and it may include many other elements than the ones mentioned from titanium, silicium, tin, antimony, to even pure metallic lithium. Let’s use a concrete example. A large pouch cell made of graphite at the anode and of NMC111 at the cathode. NMC111 means that nickel, cobalt, and aluminium are in equal parts in the active material. This chemistry is typically used in current electric cars and stationary energy storage solutions. In terms of weight, a best-in-class cell of 70Ah at 260 watt hour per kilogram would then weigh almost one kilogram. Out of that, 91 g would be lithium, 232 g cobalt, 231 g nickel, and 216 g manganese. Active materials would thus represent 70% of a cell mass, only 9% of it being lithium.

The process that ends with the manufacturing and assembling of battery cells begins with extraction of metals which are first mined then refined into precursors at a technical grade suitable for batteries. A lion’s share of lithium is mined out of Salars in the ABC triangle in South America, Argentina, Bolivia, and Chile. Those three countries represent about 50% of worldwide proven reserves and are blessed with easy to collect and naturally high grade lithium salts. Compare to just hard rocks found in China, Australia, USA, and others. Today around 50% of worldwide refining capacity is located in China. On the other hand, Cobalt is a pretty specific resource. It’s almost exclusively mined as a by-product, mainly from nickel. It requires extensive refining and purifying to have a suitable grade for batteries. Moreover, Democratic Republic of Congo is a central stakeholder of its metal, holding more than 70% of the worldwide known resources and 50% of the current supply. Today around 80% of the worldwide refining capacity is located in China. Finally, nickel, manganese aluminium, copper, and natural graphite are mined all around the world in various places and are less prone to geopolitical issues in terms of sourcing.

Proven reserves of lithium are estimated to be 30,000 kilotons of lithium metal equivalent. Resources are estimated to be at least 60,000 kilotons. Current consumption of lithium, which half of it goes to lithium-ion battery, is 35 kiloton per year. So at the current rate, we can then estimate that we have about 1,000 years of consumption in front of us. Nonetheless, the EV market is relatively small as of today, and its gross could change the picture dramatically. Let’s assume we convert overnight into EVs one billion light duty vehicles, which is about the current worldwide fleet. With a 40 kilowatt hour pack hypothesis we would have on average three kilograms of lithium metal per vehicle, versus 3,000 kiloton or 1/10 of the world proven reserves for the whole fleet. Nonetheless, it’s still significant and the implementation of a closed-loop recycling will be a must-have to ensure the sustainability of this industry. Cobalt is scarce. Only 7,000 kiloton of proven reserves, with probably 120,000 kiloton of resources. The same 40 kilowatt hour EV pack would consume from 2.5 to 5 kilogram. 1 billion EV would thus consume 5,000 kiloton, 70% of worldwide proven reserves. Finally, the consumption of nickel, manganese aluminium, copper, and natural graphite for lithium-ion battery is less significant versus our primary usage or versus variable reserves. It’s for example, the case of nickel, which is driven mainly by stainless steel business. Nonetheless, the growing demand for batteries may have a non-negligible impact on forward prices.

No risk of total resources supply, but availability for demand

There’s absolute minimum risk of lithium supplies running low in future. The real danger is that the rate at which lithium is being recovered is not enough to meet the rising demand. Between 2010 and 2014, for instance, lithium ion battery consumption increased 73 percent, but production levels could only be increased by 28 percent. Many analysts expect that by 2030, lithium demand could be double or triple its current level. Tesla’s is by no means the only company who is building battery gigafactory. There are others being built around the world (at least 12, according to Benchmark Mineral Intelligence) and these gigafactories will raise the global demand for lithium batteries to some 122 GWh by 2020. That’s up from 35 GWh currently.

Strong price increase for lithium of 270 percent since 2010

Uncertainty about availability of lithium skyrocketed the price of lithium. In 2010, the price of lithium was $5,180 per metric ton. By 2012, the cost reached $6,000 per metric ton, and by the end of 2017, a metric ton was being sold for about $14,000 – a 170 percent increase over 2010 levels.

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Figure (Source: USGS) demonstrates this sharp increase in prices.

 

Overall, some of the materials mentioned above which are also present in our batteries made one or two or even three world trips before being in the final battery delivered to a customer. Shortening the supply chain is a key challenge for all stakeholders which could substantially decrease costs, and improve ecological footprint, and supply chain resiliency.

Fayaz Ahmed,
Founder & Chief Analyst,
Sustainable Energy & Blockchain Solutions (SEB’S)

 

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