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Even before the Biden Administration announced the “most aggressive” plan to curb tailpipe emissions to date with new vehicle pollution standards proposed by the Environmental Protection Agency (EPA) last month, automotive OEMs and Tier 1 suppliers were facing difficulties getting both the parts and raw materials needed for their electric vehicle (EV) components.

The newly proposed rules requiring automakers to reduce carbon emissions by 56% in their 2032 models compared to 2026 models will only add fuel to the fire at a time when geopolitical and trade tensions between the United States and our allies on one hand, and China on the other are soaring.

Recent policy developments, such as the Biden Administration’s invoking of the Defense Production Act (DPA) for the five “battery criticals” — graphite, lithium, cobalt, nickel and manganese –  as well as the rare earths, declared DPA priority materials during the Trump Administration, plus the passage of the Inflation Reduction Act (IRA), the energy provisions of which contained EV tax credits observers said would send important signals to investors and industry that the U.S. was serious about domestic supply chains, have provided hope for a positive change, but, as ARPN pointed out recently, “after decades of dwindling domestic resource production and rising import reliance, no one ever said turning an aircraft carrier this size would be easy.”  

Lithium has, to an extent, become the poster child of the push to strengthen EV battery supply chains – after all, it’s mostly “Lithium-ion” batteries we’re talking about. Concerns are certainly well-founded with material shortages for lithium predicted to hit in just a few short years, but a recent Autoweek story and interview with Graphex Technologies CEO John DeMaio outlines “another serious material issue on the horizon: graphite sourcing.”  

As ARPN has previously argued, while much of the focus has been on the cathode of the EV battery, the anode warrants a close look, and may in fact be our “Achilles heel when it comes to building out a battery supply chain independent of China.”

DeMaio explains:

“As far as the percentage of the components in a battery cell, almost the entire anode is graphite. So that makes graphite about 45% of the individual cell.

On a total component basis for an EV battery, graphite is about 25% to 28% of the whole thing. It’s by far the largest component by volume and mass in the battery. And people don’t realize that a lithium-ion battery is sometimes up to 15 times more graphite than lithium. It’s really the unsung player.”

While to date, the supply chain for this “unsung player” is quite firmly dominated by China, the sourcing provisions in the energy passages of the recently passed Inflation Reduction Act (IRA), coupled with the recently announced grants to “supercharge” U.S. EV battery and electric grid supply chains are important steps towards mitigating that potential single point of failure.

Projects currently underway are expected to qualify for the IRA credits, and ultimately help “domesticate” the graphite supply chain, including Graphex’s pitch coating facility coming online in Michigan, and Graphite One, Inc.’s cooperation with two U.S. national laboratories under the Department of Energy umbrella in an effort to establish an all-American mine-to-manufacturing supply chain. Graphite One, Inc.’s Graphite Creek deposit near Nome, Alaska was recently recognized by the U.S. Geological Survey as the largest U.S. graphite deposit and among the largest in the world.

As DeMaio points out, it’s a “herculean task at hand” because “the United States (…) is so intertwined with China that it’s a little impractical to think we’re going to extract ourselves overnight.”

The challenge becomes even bigger if one considers that, as scholars at the Wilson Center’s Environmental Change and Security Center have argued “the Biden administration’s efforts to free up federal funds for domestic mining activities has highlighted the inherent conflict between accessing the minerals needed for climate action and the administration’s commitment to environmental and social justice.” 

However herculean the task may be, it is one we cannot shy away from because as ARPN has previously pointed out, lofty goals of net carbon neutrality – and that includes the just-released proposed EPA emission standards –  will not be achievable if we don’t embrace a push to secure critical mineral supply chains from “soup to nuts” to borrow a term used by Energy Secretary Jennifer Granholm.

All of which brings us back to what we have noted often at ARPN — the first word in supply chain is… supply.

If history holds one important lesson for us, it’s that most things in life are cyclical.

Low tide and high tide, ups and downs, times of war, times of peace.  What holds true on a personal level, also applies to bigger fields like economics.

As value investor and author Howard Marks phrased it:

“Mechanical things can go in a straight line. Time moves ahead continuously. So can a machine when it’s adequately powered. But processes in fields like history and economics involve people, and when people are involved, the results are variable and cyclical.” 

Commodity markets are a case in point.   As Wells Fargo Head of Real Asset Strategy John LaForge phrased it in a recent white paper, “[c]ommodities typically move together like a big family, through long boom (bull markets) and bust (bear markets) cycles.”

After a “brutal decade for commodities in the aftermath of the 2008 financial crisis,” in the wake of which “investors had all but abandoned the asset class in favor of equities,”, as Rick Mills writes for Ahead Of The Heard,  it appears that we find ourselves at the beginning of what experts call a commodity supercycle (defined by Bank of Canada as an “extended period during which commodity prices are well above their long run trend”) – a phase predicted by analysts for several years.

Writes Bruno Venditti for Visual Capitalist:

“In recent years, commodity prices have reached a 50-year low relative to overall equity markets (S&P 500). Historically, lows in the ratio of commodities to equities have corresponded with the beginning of new commodity supercycles.”

Not surprisingly, Visual Capitalist has put together a handy chart and provides some useful context:

Wells Fargo’s LaForge believes that we have already entered a new commodity supercycle that started in 2020, and with these cycles typically lasting a decade or longer, we are merely in the “third inning.”

However, while, as Mills points out, “all supercycles have three indicators in common – a surge in supply, a surge in demand, and a surge in price” – this new commodity supercycle could “look a bit different from the previous ones for one simple reason – an increased focus on climate change.”

As JP Morgan writes, “climate change policies may lead to the largest peacetime redeployment of investment and capital,” with demand for critical minerals, especially the battery criticals lithium, graphite, nickel, cobalt and manganese, as well as others underpinning the green energy shift like copper and the rare earths surging to unprecedented heights.

Analysts for metals retailer and commodities media organization KITCO believe that “while overall market conditions in critical metals remain volatile, the long-term fundamental drivers are strong.”

They add:

“Governments and corporations continue to ramp up large-scale investments in critical metals like lithium, uranium, copper and nickel, with the goal of onshoring the primary components of energy transition infrastructure and securing a resilient and sustainable supply chain. This considerable task — the reversal of the movement over the past three decades to increase globalization and offshoring to low-cost producers and supply sources — is in its early stages today. But despite its nascency, this powerful trend will have considerable consequences for commodities, capital markets and inflation.”

Bumps are to be expected, but the trajectory for now, is expected to be a longer upward trend.

How do U.S. and our allies’ mineral resource stakeholders in the United States fit into this supercycle?

Mills does not mince words:

“Here in the West, it isn’t only that we have failed to maintain mining and oil investments. We have also put roadblocks in the way of mining, such as the lengthy permitting process in North America. In Canada we’ve let interest groups hostile to corporations dictate resource policy.

We haven’t built the necessary infrastructure, either. (…)

All of these factors are limits to growth.”

He does see a silver lining, however, in the fact that “North Americans are finally starting to realize that to have security of supply, we need to develop our own mineral deposits.”

He concludes:

“The first step is recognizing that we have these metals, we do not need to purchase them from China, the DRC, Russia or any other foreign producer, we can mine and refine them right here.

Next is upping our exploration game — and nobody is better at it than Canadian junior resource companies — so that we can find and develop the deposits that will become the world’s next mines.”

Against the backdrop of the accelerating global push to net zero carbon emissions, a volatile overall geopolitical climate and a new EPA proposal to tighten tailpipe emission standards U.S. stakeholders are looking for ways to secure critical mineral supply chains. The expectation is that with the proposed EPA rules requiring automakers to reduce carbon emissions [...]

As the Wall Street Journal reports, a new OECD study has found that export restrictions on Critical Minerals have increased more than fivefold from January 2009 to December 2020, suggesting that “export restrictions may be playing a non-trivial role in international markets for critical raw materials, affecting availability and prices of these materials.”   While this significant shift [...]

The Biden Administration has announced the “most aggressive” plan to curb tailpipe emissions to date, with new vehicle pollution standards proposed by the Environmental Protection Agency (EPA) and announced by the White House last week. If finalized, the proposed rules would require automakers to reduce carbon emissions by 56% in their 2032 models compared to 2026 models.  The expectation is [...]

In a new video clip, the Wall Street Journal explores one of the areas of competition between the two superpowers that is emerging as a key theater of the 21st century tech wars: EV battery supply chains. Followers of ARPN know all too well, and our friends at Benchmark Mineral Intelligence clearly visualized this fact in [...]

As ARPN outlined earlier this week, the European Union has dropped its response to the United States’ Inflation Reduction Act passed last summer: the just-dropped Critical Raw Materials Act (CRMA) paired with sister legislation, the Net Zero Industry Act (NZIA), which aims to support investment in manufacturing capacity in ‘net zero emissions’ technologies in Europe. The CRMA not only seeks to streamline [...]

The U.S. will not achieve complete lithium battery supply chain independence by 2030, but the country could capture 60% of the economic value consumed by domestic demand for lithium batteries by that year, generating $33 billion in revenues and creating 100,000 jobs, if it implements a series of recommendations put forth in its just-released action [...]

by Daniel McGroarty The Critical Mineral space in the U.S. experienced a dramatic development this week, largely overlooked beyond specialty reporting in the defense and energy media:  With his February 27, 2023 Presidential Determination, President Biden once more invoked Title III of the Defense Production Act (DPA) to strengthen critical mineral supply chains – and in doing [...]

Sometimes hailed the “fuel of the green revolution,” lithium has been the posterchild of the “battery criticals.”  Start with the fact that the leading battery technology underpinning the shift towards net zero carbon emissions is called “lithium-ion.” With its high electrochemical potential and light weight, the commercialization of the lithium-ion battery has transformed and accelerated the renewables shift.  Lithium is [...]