Australia, UK critical minerals entities eye creation of integrated battery supply chain

Opportunities may exist for Australia and the UK to establish an integrated battery supply chain to feed the electric vehicles sector, industry participants said Nov. 24.

Such a chain could bypass China's current dominance of battery metals supplies, viewed as problematic in terms of pricing and environmental, social and governance criteria, which are increasingly important factors for vehicle manufacturers and their clients.

Government support in financing, incentives and a broader educational drive will however be essential to build alternative supply chains, agreed participants on a webinar called Bridging the Gap Between Miners and OEMs, organized by the Critical Minerals Associations of both the UK and Australia.

"Governments need to understand that batteries are strategic national assets and if we don't invest, and if governments don't support, China will take 100% of the market," said Quentin Wilson, a UK-based automotive sector journalist who aims to raise consumer awareness of the environmental and social importance of EVs. "It's massively capital-intensive and governments need to help."

China's critical minerals processing sector has been 100% government-funded, Wilson noted.

Stephen Grocott, CEO of Australia's Queensland Pacific Metals that has a carbon negative nickel processing project, expressed concern about the high carbon intensity of nickel produced by Indonesia, processed in China and used in EVs worldwide, "without accountability."

Lithium

Western Australia is the largest producer in the world of spodumene, or lithium ore -- a key ingredient for EV batteries. Currently, 90% of this is sold on offtake arrangements into China, which effectively controls 90% of global lithium supplies, said Jeff Townsend, founder and CEO of the UK's Critical Minerals Association (CMA) and John Walker, CEO of the UK's Tees Valley Lithium, which is building lithium processing facilities in both the UK and Australia.

It's now time to see "if we can put Australian upstream together with UK downstream," Townsend said.

EV Metals Group plc (EVM), a global battery chemicals and technology business, earlier this year launched the Australian Lithium Alliance, a strategic initiative to partner with Australian companies to accelerate exploration, development, mining and processing of lithium minerals. This aims to provide, through joint ventures and off-take agreements, "an alternative to Chinese companies that currently dominate the purchase of spodumene concentrate from Australia to supply chemicals processing companies in China," according to a statement on EVM's website.

"We have the once-in-a-lifetime opportunity to create a resilient and sustainable non-China supply chain for the automotive sector," Tees Valley Lithium's Walker said. "We have to completely reinvent the supply chain to eliminate use of high-carbon materials in lithium processing such as the use of caustic soda and sulphuric acid - which won't be so available in future - and replace this with green energy."

Saudi Arabia may play part

The alternative supply route for battery materials also looks set to include Saudi Arabia, which is seeking to develop mining and metals as a third pillar of national development, reducing economic dependence on oil and petrochemicals.

EVM is currently investing around $3.9 billion in a battery chemicals complex in Saudi Arabia to produce cathode active materials for EV manufacturers, aimed at international supply chains. This will have four processing lines to produce 100,000 mt/year of lithium hydroxide monohydrate and three processing lines to produce 450,000 mt/year of nickel sulphate. Construction of the complex's lithium chemicals plant will start in Q1 2023, according to EVM's website.

"We're looking forward to building a chain from critical minerals in Australia to downstream in the UK," EVM CEO Michael Naylor said.

Lithium prices have more than doubled this year as demand from the EV batteries sector has grown in a tight market. Platts assessed lithium carbonate up $300/mt on Nov. 22 from Nov. 21 at $78,000/mt -- also up $1,300/mt from Nov. 15. Lithium hydroxide was unchanged on the day and down $100/mt on the week at $84,000/mt, according to data from S&P Global Commodity Insights.

Financing

Currently, China is in a strong position to write offtake agreements for Australian spodumene because it has the midstream facilities to process spodumene into precursor cathode materials to be used in batteries, Townsend said. Because China has the processing facilities it can gain financing for offtake agreements "and for the Australian spodumene producers, China's been the only game in town," he said.

"We need to build global midstream opportunities outside China. But it's the most capital intensive part of the operation: it can cost $350 million to $500 million to set up a midstream operation," the CMA CEO said.

"We as an industry need to collaborate with government," said Naylor.

There is "a complete disconnect" between government decarbonization targets and what is going on in the EV supply chain industries, especially as the UK, Europe and the US don't have the midstream facilities to supply their EV industries with cathode-active materials, Naylor said. It may take eight years to build a supply chain, he noted.

"Europe and US depend about 80% on external midstream," the EVM CEO said. "With the way the Inflation Reduction Act is structured in the US, the US will need to build midstream -- this gap is a challenge for government."

The IRA, introduced in recent months, may restrict imports of some critical minerals from certain jurisdictions into the US, making the building of domestic battery materials chains more urgent.

The CMAs plan to produce a combined UK-Australia report with suggestions on how to move forward bilateral collaboration on building new supply chains for the batteries sector, Townsend said.