Experts Warn of Supply Cliff for Battery Raw Materials The following is an excerpt from Investing News Network article:
EV supply chain facing raw materials "cliff"
Other key challenges facing the EV market lie within the global battery supply chain.
Is there enough battery manufacturing capacity to meet future demand? Are there enough battery metals projects in the pipeline to supply feedstock to battery plants? Benchmark is currently tracking around 408 gigafactories. Of these, only 191 are active, and not all of those are operating at full capacity. As more and more of these gigafactories come online and their production rates increase, so too will their consumption of lithium and other battery metals.
Scarrott gave the example of the proposed expansion of Tesla’s (NASDAQ:TSLA) Nevada gigafactory to nameplate capacity of 140 gigawatt hours — on its own it could consume an eighth to a fifth of global lithium supply.
“If you think about this contextually, with all the other gigafactories that are emerging, there is a lot to play for. There is a gunfight on the horizon,” he warned. “We have to be very frank about where we're at with this situation. So really, we are at a cliff edge in terms of raw material supply.” In his view, significant investments will need to be made upstream to deal with these deficits in the supply chain, with the important question being when that will happen.
This challenge is being exacerbated by the low price environment for lithium over the past few years, as Perks pointed out in his presentation. Lower lithium prices have deterred investment in lithium greenfield and expansion projects, as well as curbed production. However, he told attendees that well-managed resource companies that can develop projects during this low-price environment will be better positioned to gain market share before the next uptrend.
Although Benchmark is forecasting higher lithium supply for 2024, Perks said that supply overhang is expected to be short-lived and the sector will enter a deficit period much sooner than previously forecasted.
Carmakers taking steps to secure supply chains
According to Benchmark’s Lithium-ion Battery Database, lithium-ion battery demand is forecast to grow almost 400 percent between 2023 and 2030 to reach an impressive 3.9 terawatt hours.
Meeting this overwhelming and fast-paced demand growth will require expedient mobilization of capital in the global lithium-ion battery supply chain, Scarrott apprised. How much of an investment? “We've been doing some number crunching across the whole value chain, and we estimate that it's going to take around well over half a trillion dollars across the whole value chain just to meet the foreseen deficits that are on the horizon.”
Seeing the writing on the wall, major US carmakers such as Ford (NYSE:F), General Motors (NYSE:GM) and Tesla are trying to catch up to their Chinese counterparts by making moves to secure their own supply chains through offtake agreements and equity investments in lithium producers, as well as direct investments in battery plants.
“What we are observing over the last year to 18 months, certainly in the North American market, is some of the original equipment manufacturers are starting to make a play into the upstream, or at least saying that they're going to,” said Scarrott. “And of course, one of the ways to secure your supply chain, mitigate some of the resource constraints and also improve bottom line is through backward integration.”
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