As pressures continue to mount, U.S. stakeholders are beginning to realize the urgency of building supply chains “that are safer, more secure and not beholden to a country that has multiple human rights violations, predatory lending practices, and vast national security complications.”  For now, however, too often, automakers still have to turn to Chinese suppliers to meet their material needs.

Underscoring the extent of China’s chokehold on critical mineral supply chains, especially for the “battery criticals” lithium, cobalt, nickel, graphite, and manganese, Tesla Inc. signed two new long-term contracts with two of its existing Chinese battery materials suppliers, according to Bloomberg.

The company signed pricing agreements with Zheijang Huayou Co. and CNGR Advanced Material Co. for supplies, specifically ternary precursors used for energy storage, until the mid-2020s.

As followers of ARPN know, China dominates not only the resource development segment of the EV battery supply chain, but also the processing segment for the battery criticals.  As Manhattan Institute senior Fellow Mark Mills told the Daily Caller News Foundation: “If you want to build EVs, one needs access to the entire suite of specialty chemicals, and the vast majority of those are produced in China – the issue is not the mining per se, but the refining wherein China utterly dominates most relevant chemicals. Or else one could wait 5 to 10 years – if you’re lucky – for non-Chinese refineries to be built.”

Amidst the global push towards net zero carbon emissions, demand for EVs will continue to soar, in the U.S. fueled in part by the adoption of an ambitious climate agenda by the Biden Administration, further driving up demand for critical minerals.

The question becomes whether the net zero transition deepens dependency on Chinese and foreign-sourced Critical Minerals – or galvanizes a push to provide new sources of supply in the U.S..

Thankfully, positive policy developments that could help reduce our over-reliance on China are underway.

U.S. President Joe Biden in March of this year invoked the Defense Production Act to encourage domestic production of the metals and minerals deemed critical for electric vehicle and large capacity batteries, including nickel, and the Administration has acknowledged that “the need to domestically produce more metals is rising as EV’s go mainstream, but that new mines must not harm the environment.”   The development followed the adoption of a broader “all-of-the-above” approach to supply chain security on the part of the Biden Administration in 2021, and may be strengthened with the adoption of provisions contained in the Inflation Reduction Act just passed by the U.S. Senate.

The package would require that by 2024, 40% of the minerals used in EV batteries would have to be extracted, processed or recycled in the U.S. or by a free trade partner — a requirement that increases to 80% by 2027 – and 100% for battery components by 2029. According to John Adams, U.S. Army brigadier general (ret.), the sourcing requirements for the battery criticals could be key to addressing “emerging energy security vulnerabilities before they are intractable crises.” 

On the supply side, the mining industry is ready to meet this challenge and has increasingly been harnessing advances in materials science and technology to help develop domestic critical minerals supplies while maintaining and advancing responsible mining practices.   A case in point we recently highlighted was  Tesla’s  deal with Talon Metals Corp, developing a new nickel project in Minnesota, which Elon Musk singled out, “due to plans to make the electric vehicle battery metal in a way it considers more environmentally friendly.”

As we outlined, this is the mine site for which the U.S. Department of Energy recently announced a $2.2 million award to fund to a Rio Tinto-led project to achieve carbon capture by a process that mineralizes the carbon in rock – a process far more stable than methods that inject carbon, where it remains vulnerable to seepage and fracturing due to earthquakes.

These are positive developments, but more must be done. Until then, there will be more announcements of automakers signing deals with Chinese companies — certainly not an ideal scenario at a time when tensions between the U.S. and China are mounting over Taiwan.