Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
In a high-tech twist on hammering pickets into the ground, the U.S. State Department has launched an online tool aimed at staking America’s claim to many of the world’s rare-earth minerals.
The U.S. has become increasingly concerned about securing a stable supply of critical minerals used in car batteries, solar panels and wind turbines. Many of those resources are located in emerging markets that may be seen as too risky by American investors looking for “best-in-class” standards.
That raises the potential for “two really bad outcomes,” Francis Fannon, the U.S. assistant secretary of state for energy resources, said in an interview. “Either the world will not get the minerals it needs in order to fuel energy transition technologies,” or “that investment would only come from those who are less concerned about governance issues, transparency, corruption, environmental standards and best practices.”
The new initiative is designed to give countries with nascent resource industries an online “toolkit” to help them develop assets in a way that will allow them to meet the standards of U.S. investors
The new initiative is designed to address these problems by giving countries with nascent resource industries an online “toolkit” to help them develop assets in a way that will allow them to meet the standards of U.S. investors.
Fannon made the comments ahead of the annual convention of the Prospectors & Developers Association of Canada in Toronto, at which the online toolkit is being launched.
By 2050, as much as 24% of the world’s electricity will be used to power electric cars, and solar and wind energy will provide almost half the world’s electricity, BloombergNEF predicts. Many of the minerals required for decarbonization are used in other high-demand products, including smartphones. As just one example, BNEF forecasts nickel demand from lithium-ion batteries alone will grow 15.6 times between 2018 and 2030.
China, which already produces roughly 70% of the world’s rare earth minerals, supplied about 80% of America’s rare earth imports in the three years ended 2018, according to the U.S. Geological Survey. State-owned Chinese companies have also been active buying up critical mineral deposits outside the country.
“Africa is a huge continent for a lot of these critical minerals and the Chinese have been making heavy advances in that area, offering support and offering investment,” Colin Hamilton, managing director of commodities research at BMO Capital Markets, said last week on the sidelines of a conference in Florida. Meanwhile, coronavirus has “crystallized” America’s determination to diversify its supply chain of key materials and products, he said.
Last year, the State Department’s Bureau of Energy Resources launched an international partnership, the Energy Resources Governance Initiative, to encourage responsible mining of key minerals.
The website is the latest part of that initiative. Founding member countries with track records for responsible development, including Canada, will share strategies and tips with other nations on project development, production and stewardship, Fannon said. The website includes specific information such as how to create data management systems to quantify a mineral resource, and complex “decision trees” to weigh the costs and benefits of different approaches.
In 2017, U.S. President Donald Trump signed an executive order seeking to protect America from supply disruptions in critical minerals, saying such disruptions represent “a strategic vulnerability” to the country’s security and prosperity. ERGI has identified 17 rare earth elements and 14 minerals, including copper, lithium and uranium, that are seen as essential for renewable energy equipment and infrastructure.
At the height of the trade war between the two countries, China suggested it could restrict the export of some rare earth minerals. Those concerns have eased with the signing of a phase-one trade deal, but Trump remains determined to ramp up domestic production and form partnerships with other countries to secure supply. American production rose 44% last year.
“We know that reliance on one country for anything, or anyone source, exposes all customers to a risky supply chain if there were a supply disruption of any type,” Fannon said. “The Earth’s crust is blessed with good rocks everywhere. It’s what’s above the ground that will help determine whether a U.S. firm — a best-in-class company — will invest in that country.”
(By Danielle Bochove, with assistance from Nick Wadhams)
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