US should create consortium to buy battery materials, gov-backed report says

The report by Li-Bridge, released on Friday February 17, identified lithium and nickel as the two most pressing critical minerals to focus on. But it also noted the risk of bottlenecks in any critical minerals used in lithium batteries or battery production in the years ahead in the absence of any mechanisms to monitor these markets or further investment in the sector.

The report did not specify how the consortium of companies would be comprised and what types of corporates would be included.

Given the global race to secure critical minerals to achieve the energy transition and meet net-zero targets, market participants said the consortium is likely to span the battery supply chain. This would be similar to the collaboration of more than 40 companies, ranging from market leaders and startups across the automotive to chemical and electric utility, mining and advanced battery sectors, that created the report.

Creating a consortium would improve the country’s purchasing power and reduce risk via access to a more diverse pool of material suppliers. It would also give the US a further boost in its bid to encourage domestic mining and manufacturing and create more integrated supply chains for electric vehicles (EVs), which have typically relied on overseas countries for critical minerals and battery components.

Creating a purchasing organization would be a bold move for the country, which uses its US Defense Logistics Agency (DLA) Strategic Minerals for the analysis, planning, procurement and management of materials critical to national security. Tenders for the sale of DLA-stockpiled tin and zinc were most recently made last year, but the exact volumes of stockpiled material are unclear, a process permitted by the Strategic and Critical Materials Stock Piling Act.

This would probably have important consequences on markets for critical minerals. These include lithium, nickel, cobalt, copper, manganese and graphite, along with other materials included on the US critical minerals list.

Lithium prices bottomed out in 2020 but have risen since. This followed a revival in demand from the downstream battery sector for EVs.

Fastmarkets’ weekly assessment of the lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price range exw domestic China was 410,000-440,000 yuan per tonne on Thursday.

This was down by 21,000-35,000 yuan per tonne from 445,000-461,000 yuan per tonne on February 9 but up from a multi-year low of 37,000-41,000 yuan per tonne from July to October 2020.

According to Fastmarkets’ analysts, lithium has been in a supply-demand deficit for the past two years and is set to be in a 14,300-tonne deficit in 2023.

Pressure builds to secure battery material supply chains

There is already intense pressure to secure battery materials, with automotive company Tesla publicly and repeatedly calling for supplies of lithium and nickel and criticizing wild price swings that have accompanied the competitive push to secure them.

Automakers have started investing directly in mining companies and projects to create a more vertically integrated supply chain and control access to raw materials they need.

The US has been pushing to develop its own sources of critical minerals for batteries, invoking the Defense Production Act last year.

The report comes on the heels of the Inflation Reduction Act (IRA), which aims to cut 40% of the US’ carbon emissions by 2030 (from 2005 levels), closer to its goal of a 50% cut in that timetable.

The report also recommended strengthening the United States’ National Defense Stockpile for battery-critical minerals and materials to smooth commodity pricing cycles and avoid exacerbating supply shortages or inflating raw material costs for industry. The stockpiling strategy will need to consider storage conditions, expiration dates and use in government-procured energy storage applications, among other factors, the report added.

Li-Bridge was announced in October 2021 by the US Department of Energy (DOE) and its agency, the Argonne National Laboratory. It is spearheaded by three industry trade groups — NAATBatt International, the New York Battery and Energy Storage Technology Consortium and New Energy Nexus — with active involvement from DOE national labs and Boston Consulting Group.

According to the report, several Li-Bridge participants anticipate a worldwide shortfall in supplies of critical minerals and energy materials within the next four-12 years before new foreign and domestic sources of supply can be brought online.

An estimated 76% of lithium battery cells and the large majority of cell components are made in China, the report said. Current production of critical minerals occurs mostly outside of the US and its free-trade allies. According to the US Geological Survey, China is the dominant supplier of 21 of the recognized critical minerals in the US.

Lithium-based batteries are also critical for achieving US climate objectives. Without reliable access to lithium battery technology, the report said that the US has no chance of meeting its 2050 net-zero carbon emissions goal and that, because US defense applications are increasingly dependent on lithium-based batteries, there are national security risks in relying on batteries and battery components made abroad.

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