critical minerals

Already burdened with increasingly volatile supply chains in the wake of the coronavirus pandemic, rising geopolitical tension and Russia’s war on Ukraine, automakers’ drive towards net zero emissions is facing an additional challenge as environmental, social and governance pressures on the industry increase.

The latest case in point concerns one of the new materials on the U.S. Government’s Critical Minerals List — nickel:

Earlier this week, dozens of environmental non-governmental organization (NGOs) sent an open letter to Tesla CEO Elon Musk and company shareholders, asking that the company terminate plans to invest directly into Indonesia’s nickel industry over concerns that the company’s plans would result in disposing of mining waste into the ocean, increased deforestation, and overall pollution.

The NGOs further demanded that the company ban nickel sourced and produced in the country from being used in any of Tesla’s business lines.

The letter, according to Reuters, was sent in the wake of a meeting between Indonesia’s President Joko Widodo and Musk in Texas in May to discuss the company’s potential investments.

A critical ingredient in lithium-ion battery technology, nickel has been in the crosshairs of automakers’ worries for quite some time, even before Russia’s invasion of Ukraine.  Experts were issuing warnings that global demand for EV battery grade nickel could outstrip supply by 2024, and Elon Musk famously called on global mining companies in 2020 to boost production of nickel in early 2020, when he publicly announced:

“Any mining companies out there … wherever you are in the world, please mine more nickel. (…)  Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way. (…) Don’t wait for nickel to go back to some high point you experienced five years ago (…).”

The good news is that while Indonesia may be the biggest producer of nickel globally, and U.S. nickel production had been considered “objectively very lame,” as Musk lamented on Twitter that year, things are changing.

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 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.

Followers of ARPN may recall Tesla’s recent 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.

This may not be a silver bullet for the auto industry’s nickel woes — but, as the Indonesia situation shows, to ensure supply chain security for its manufacturers critical mineral needs, the U.S. is well-advised to pursue a comprehensive all-of-the-above approach to resource policy that promotes the domestic — socially and environmentally responsible — production and processing of critical materials.

The mainstream media and parts of the political establishment may just now have begun to realize it — but followers of ARPN have long known that our nation’s critical mineral woes are real, and go beyond the often discussed battery criticals (lithium, cobalt, nickel, graphite, and manganese) and include one of the key mainstay metals: Copper.

Less flashy and headline-grabbing than some of its tech metal peers, copper deserves far more credit and attention than it is currently receiving. ARPN has long touted copper’s versatility stemming from its traditional uses, new applications and Gateway Metal status.

A quick look at a 2018 Visual Capitalist chart also makes unmistakably clear that copper is also an irreplaceable component for advanced energy technology, ranging from EVs over wind turbines and solar panels to the electric grid, and as such an indispensable building block of the green energy transition:

Copper — and its mainstay metal peer aluminum — are to be found in all four categories, hardware, electric motors, distribution & fuel and energy storage. The average EV requires four times more copper than gas powered vehicles, and the expansion of electricity networks will lead to more than doubled copper demand for grid lines, according to the IEA.

Consequently, it should not come as a surprise that a new report has taken a closer look at the copper supply picture in the context of the global push toward net zero carbon.

As reported by Bloomberg, a new S&P Global study “warns of ‘unprecedented and untenable’ copper shortfalls in the coming decade as suppliers grapple with a near doubling of demand by 2035. Prices that fell below $7,500 this week are seat to soar back above their $10,845 peak later this decade, driven by the metal’s key role in the clean-energy and transport industries.”

Current market slowdowns notwithstanding, forecasts see long term demand reaching around 50 million tons by 2035 from 25 million today, and an annual supply shortfall of almost 10 million tons could open up in 2035 according to the study — which would amount to the “equivalent to 20% of demand projected to be required for a 2050 net-zero world.”

The “burgeoning supply gap would increase the US’s reliance on copper imports from 44% to as much as 67% by 2035,” writes Bloomberg. Ultimately, supply shortages could become “so severe and prices so high in coming years that they risk delaying the global shift away from fossil fuels.”

As the Wall Street Journal pointed out earlier this year, there is no easy way out of the critical mineral resource challenge, as “years of underinvestment in new mines means they don’t have additional production that can be brought on quickly. After a decadelong focus on productivity, existing operations are mostly running at full tilt. Difficulties in getting permits to build pits and community opposition have slowed developments in some countries, and scuttled projects in others.”

And, as Laura Skaer, a member of the board of directors of the Women’s Mining Coalition and former director of the American Exploration & Mining Association, outlined in a piece for Morning Consult last summer, the challenge is not just mining, but also processing:

“Last year, the United States imported 37 percent of the copper we used. China already refines 50 percent of the world’s copper and the United States only refines about 3 percent. National security experts have warned that relying on China for critical supply-chain materials like refined copper poses a serious threat to America’s national security interests.”

However, as we previously argued,

“from a U.S. supply perspective, there is reason to be optimistic. While snubbing the material again for its updated Critical Minerals List, the Biden Administration has recognized copper as an integral component of Lithium-ion battery technology, in the context of being what we have called a ‘gateway metal‘ to other critical materials, and for its ‘use across many end-use applications aside from lithium-ion cells, including building construction, electrical and electronic products, transportation equipment, consumer and general products, and industrial machinery and equipment’ in its 100-Day Supply Chain Review report.

Coupled with new reports that ‘US regulators are warming to approving new domestic sources of electric vehicle battery metals, as Washington bids to avoid a reliance on strategic minerals imports similar to that on crude oil,’ this is an encouraging development.”

Thankfully, the private sector is ready to step up to the plate, harnessing advances in materials science and technology to help develop critical mineral resource supplies while maintaining and advancing sustainable mining practices. With the stakes ever-increasing, now is the time to unleash our nation’s mineral potential.

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