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Europe’s carmakers face raw material bottleneck for EV batteries By Reuters


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© Reuters. FILE PHOTO – Employees at Volkswagen, a German automaker, work in the production line for VW’s new battery plant in Salzgitter (Germany), September 23, 2019. REUTERS/Fabian Bimmer

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By Ilona Wissenbach

FRANKFURT, (Reuters) – Major European carmakers such as Volkswagen (DE), Daimler(OTC:), and Stellantis are racing for battery cell supply in Europe. However, they may have to face a greater challenge as they try to transition to electric vehicles – finding sufficient battery raw materials.

The inability to procure sufficient supplies of nickel, cobalt, manganese, or lithium could slow down the switch to electric vehicles (EVs), increase their cost, and pose a threat to carmakers’ profit margins.

Ultima Media’s auto analyst Daniel Harrison says, “There is a serious doubt as to whether supply will keep up with demand throughout the battery supply chain.”

Up until recently, Europe was considered to have lost the race for the battery market to Asian companies like South Korea’s LG Chem and Japan’s Panasonic. (OTC:), Ilka Von Dalwigk, EIT InnoEnergy. The European Union has established a network of companies funded through the “European Battery Alliance”.

Von Dalwigk says, “Nobody thought that was a problem.” “We can import batteries cells,” was the thought.

However, forecasts by banks such as UBS that EVs would rise over the next decade shocked politicians and carmakers and forced a rethink in battery manufacturing.

There are many battery-friendly plants

These were followed by major announcements from car suppliers and manufacturers about new battery plants and EU funding programs worth billions. Daimler, together with its partners, will construct four more battery plants in Europe.

Recent battery factory announcements came thick and fast. EIT InnoEnergy currently lists over 50 EU projects.

All these plans are possible if the local production meets demand in 2030. A total of 640 gigawatthours (GWh), would be possible, sufficient to produce an average annual 13 million vehicles.

Ultima Media predicts that there will be 2,140 GWh of global world supply by 2030 and 2,212 GWh demand by 2030.

Ultima Media’s Harrison believes that Volkswagen’s six plants will allow Wolfsburg to meet around two-thirds of its battery requirements.

SUPPLY CHAIN GAP

This is because of the raw materials, such as nickel, cobalt, and manganese.

Benchmark Mineral Intelligence market analysts (BMI) talk of the “greater raw material disconnect”: high-level investments in cell factories and low investments in material extraction.

Caspar R. Rawles (head of analysis and pricing at BMI) explains how lithium carbonate’s price has nearly doubled within a year.

An increase in the price of cobalt is possible because of the large deposits in Democratic Republic of the Congo. These are often extracted in miserable conditions.

New mines are usually developed in seven years from the beginning of the supply chain.

Rawles said that Europe was not the only place to raise its ecar goals and cut CO2 emissions.

The global race for semiconductors is on. Due to a shortage of semiconductors, the automotive industry currently faces production interruptions that are very painful.

Volkswagen is one of the many carmakers that are fighting for raw material supply through exclusive supply agreements.

Lithium has been mainly imported from Australia and Chile. Cobalt came from the Congo and graphite was from China. Japan is home to the largest anode and cathode processing plants.

However, imports can be more costly because of tariff rises and disruptions due to logistics issues. A tanker accident recently blocked the Suez Canal.

Long journeys can be dangerous for people who are focused on creating batteries that emit as little CO2 as possible.

HOMEGROWN RESURES

The answer lies in investments in Europe’s raw material extraction. Lithium is a particularly attractive option.

Startup Vulcan Energy works to obtain lithium CO2-neutrally in thermal water from Germany’s Upper Rhine Plain. It has signed up already Renault As a customer (PA:).

Harrison says, “We’d need many projects such as Vulcan Energy. With one project in each European country, we’d have the chance to create Europe’s supply chain.”

EIT InnoEnergy believes that Europe could use 25% to 25% more of its natural resources by 2030. They are also working hard on raising additional capital, which could lead to further investments.

Another option is recycling. Here, Europe also lags behind China.

According to von Dalwigk, current quality concerns mean that only 10% to 20% could be satisfied with recycled material.

Harrison warns that there’s a chance the move to emobility might slow down.

However, he states that the European Commission will need to act, as well as EU member countries, in order for more resources and recycling to be possible. “So much is at risk economically and environmentally.”



Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.