Choking on precious metal shortages
While I was tempted to talk about Brexit again this week; there is always news on that subject, and speculation to be made about what will happen to the automotive industry in the UK, and to European carmakers who sell their vehicles here. I was reminded of a conversation I recently had with the head of manufacturing at a UK-based carmaker. When I asked him how Brexit might affect his company, with its typical mix of 80% production exported, 40% to EU countries, and a UK supplier base of 36%, he said, “No problem, tell me how it will look on March 29, 2019 and I will tell you everything!”
Where Brexit may ‘choke’ the UK, and the European car industry, there are some other very serious choke points on the global roadmap: lithium, tin and cobalt. Lithium is of course the primary component of EV batteries and is being mined in re-opened pits in Cornwall in the UK (where in the past it was just a waste product of tin mining), as well as in Chile, the largest producer of the element. But supply is limited and expensive and the cost of mining the quantities needed for Li-ion will continue to rise as further exploration of new sources grows.
Tin mining was once the mainstay of the economy in Cornwall but the mines were closed some 20 years ago due to the bankruptcy of the international cartel that had controlled the market for decades. A sudden surfeit of supply led to a plunge in prices, making mining in the UK uneconomical. Now, with prices back up to $20,000 ton, and strong demand from the electronics and automotive industries due to regulations banning lead from solder, the outlook for this element is fairly healthy but like lithium, global demand and prospecting costs will inevitably cause price rises.
Cobalt is the real bugbear element; a vital part of Li-ion batteries, it is a rare element and as it is ‘locked up’ in an EVs battery for 5-8 years before being recyclable, it can almost be considered a fuel, when one considers how much demand there will be for EVs. As an example, China’s government has promised 5,000,000 EVs on the road there by 2020; this would require 95,000 tons of cobalt locked up in Chinese batteries - about 30% of total global cobalt production for 2017-2020. Cobalt is produced as a by-product of copper and nickel mining and is in short supply for the foreseeable future. Thus battery recycling will be not just desirable but essential to get anywhere near meeting the demand. If we converted all the vehicles on the road globally, it would use all the cobalt known to exist, and most of that is not economic to mine. This looming situation rather puts Brexit into perspective...
Simon Duval Smith
Simon Duval Smith
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