Tag: lithium

OM in the News: The EV Battery’s Supply Chain Problems

The Swiss mining giant. Glencore, is suspending production at an unprofitable nickel operation in New Caledonia

The global EV revolution has been losing momentum as buyers are more aware of the vehicles’ higher prices, range limitations, and charging station shortages. So automakers such as Ford, GM and Volvo are delaying investments and striking a more cautious tone about the outlook for EV consumer demand.

But a big part of that revolution has been in the development of the core of EVs, namely the batteries. “Producers of lithium and nickel, which are used in lithium-ion batteries for EVs, have been stalling projects and closing mines to save cash,” writes The Wall Street Journal (Feb. 20, 2024). Prices of lithium are down as much as 90% since the start of last year, while the price of nickel has halved.

When Albemarle, the world’s most valuable lithium company, last year announced plans for a $1.3 billion plant in South Carolina, it was hailed as transformative for the state. The high-tech project was designed to process different sources of lithium and serve as a supplier of the critical mineral for South Carolina’s burgeoning EV industry, producing enough lithium for 2.4 million vehicles annually. Less than a year later, those plans have been hobbled by the crash in battery metal prices, undercut by a slowdown in EV sales in the U.S. and China. Albemarle has deferred spending on the project, amid companywide cost-cutting that includes layoffs.

Now the world is suddenly awash with the metals after producers ramped up new projects to feed the global EV industry and compete with China. (We note that boom-and-bust cycles are commonplace in metals markets, given demand can be unpredictable and new mines typically take many years to develop).

In the more-established nickel industry, some miners say they have been left with no choice but to close unprofitable mines. The downturn has wiped out more than a fifth of Australia’s mine supply. Mothballing any mine is a difficult choice, as companies pay ongoing maintenance costs that can run into millions of dollars a month when they aren’t producing anything to sell.

Classroom discussion questions:

  1. What is the US doing to create supply chains for EV  battery components? Is it working?

      2. How do mining firms forecast the demand for minerals that are so dependent on auto demand?

OM in the News: Europe Is Embarking on a Mining Renaissance

 Governments and companies around the world are scrambling to secure resources needed to power the energy transition, but some European countries are now thinking it may be better to look closer to home, reports The Wall Street Journal (Aug. 10, 2023). Copper, lithium, nickel, and rare earths are all key minerals crucial to powering wind turbines, electric vehicles and other clean tech, but largely have been imported from abroad in recent decades.

With demand for critical minerals surging, European governments want to exploit resources closer to home.

“No doubt there is a real demand story,” said a mining expert. “We are talking about a 35-fold increase in lithium demand and we do not have any large-scale lithium mines in Europe. It’s a massive problem.” But as governments fast-track approvals on such projects and struggle to convey the importance of efforts to secure materials for the green-energy transition, resistance is growing among locals who stand to feel an impact and environmentalists who urge caution when moving forward with projects in sensitive ecosystems.

In Germany, Vulcan Energy Resources is looking to open a lithium mine, harnessing a new technology for extracting the battery metal from brine. In Sweden, Copperstone Resources is hoping to reopen a brownfield mine site to extract the red metal, while Adriatic Metals has just started mining for silver and zinc in Bosnia, with more projects planned from Finland to Greece. In Portugal, Savannah Resources is planning  to dig out one of Europe’s richest lithium deposits.

In Europe, the mining renaissance comes after years of nearly no new mining activity on the continent. Usually, opening a new mine takes 10 to 15 years, often because permitting can take years. Local backlash against new mines isn’t uncommon. The industry has a long history of environmental destruction, poor relations with local communities and deadly disasters. In 2021, local opposition derailed Rio Tinto’s lithium project in Serbia.

However, governments want and need a secure supply chain of metals and minerals. Most critical minerals are processed in a relatively small number of countries with the threat made more apparent last month after China said it would introduce export restrictions to germanium and gallium—two critical minerals used to make semiconductors. Prices skyrocketed as consumers were suddenly unsure if they would have the raw materials needed to make chips for cars, phones and other tech.

Classroom discussion questions:

  1. What is China’s role/position in the rare earths and minerals supply chain?
  2. What is the status of that supply chain in the U.S.?

OM in the News: The U.S. Enters the Lithium Supply Chain

These days, companies in the south aren’t looking to find more oil—they are instead prospecting for lithium, a metal that is increasingly prized around the world as an essential ingredient in electric-vehicle batteries. “If the U.S. is to ease its dependence for lithium on other countries such as China, it may need Arkansas to lead the way,” writes The Wall Street Journal (July 21, 2023).

The lithium geologic band running through the South

Exxon Mobil, a new player in the hunt for U.S. lithium, is planning to build one of the world’s largest lithium processing facilities in  southern Arkansas, with a capacity to produce 75,000 to 100,000 metric tons of lithium a year. At that scale, it would equate to about 15% of all finished lithium produced globally. The prospect could have the equivalent of 4 million tons of lithium carbonate equivalent, enough to power 50 million EVs.

To push the project forward, Exxon and two of its announced competitors will have to profitably scale up the technology used to siphon lithium from brine, which has been an elusive goal across the industry. This particular geologic region, called the Smackover Formation, runs from Texas to Florida. It is rich with saltwater brine, which once bedeviled companies drilling for oil. That brine also contains small amounts of lithium, and the companies are now optimistic they can scale up technologies to extract it. Drilling for lithium with this extraction method is cleaner than traditional mining, and faces fewer regulatory risks.

The mining is expensive, though, costing about $1.5 billion to build 25,000 metric tons of capacity. The three proposed projects would create 6,000 jobs– and require 1,600 trucks by 2028.

Exxon believes it can leverage its engineering prowess to become a low-cost domestic supplier of lithium, and has had discussions with battery and EV manufacturers. The company would also benefit from U.S. green-energy subsidies, which allows for tax credits of 10% of the cost of producing lithium. The firm, generally bullish about the future of oil and natural gas, is also preparing for a future less dependent on gasoline. Last year, Exxon projected demand for auto internal combustion engine fuels could peak by 2025, while EVs, hybrids and vehicles powered by fuel cells could grow to more than 50% of new car sales by 2050.

Classroom discussion questions:

  1. Why is lithium an important EV supply chain component?
  2. What is Exxon’s strategy?

OM in the News: Demanding a Bigger Piece of the EV Pie

 

Electric vehicles require six times the mineral inputs of conventional cars, and it is estimated that mineral demand for use in EVs and battery storage could grow 30 times by 2040, reports The Wall Street Journal (July 3, 2023).

Across the developing world, mineral-rich nations are demanding a bigger piece of the EV pie, saying they are moving to end the era of extract and export.  Countries with vast deposits of the ingredients essential to making EVs are digging in and trying to take advantage of the boom.

In parts of Latin America, Africa and Southeast Asia, governments are restricting the export of raw minerals, demanding that miners build processing plants locally and looking to tighten control over foreign-operated mines. The steps are sometimes described as resource nationalism, and their increasing popularity is reshaping supply chains that underpin the shift toward cleaner forms of energy.
Lithium production in Chile, where greater state control of the resource has become a priority.

Guinea, a major African bauxite producer, has imposed a minimum export price and urged companies to build local refineries. Namibia just banned the export of unprocessed lithium and other critical minerals, including cobalt, manganese and graphite. Indonesia banned the export of unprocessed nickel, pushing foreign companies to build billion-dollar facilities in the country that are turning ore into higher-value materials for EV batteries. Zimbabwe is doing the same with lithium. Chile and Mexico are seeking greater state control over their countries’ lithium reserves. These ore-rich countries are looking to move up the value chain instead of simply providing the primary inputs or commodities.

State actions aimed at that goal bring risks for the transition, potentially deterring investment in new mines needed to keep up supply. They could also raise the cost of critical materials, increase regulatory burdens for companies and lead to shortages in the future. “It’s got to be an all-around negative factor for the energy transition,” said one expert. Indonesia, a mineral powerhouse, infuriated trade partners with its 2020 ban on the export of raw nickel, but it worked. Companies from across Asia and the U.S. are pouring investments into building nickel-processing plants in the country, making Indonesia a significant player in the EV supply chain.

Classroom discussion questions:

  1. How does resource nationalism relate to the issue of core competencies that we discuss in Chapter 2?
  2. What keeps the U.S. and other developed nations from mining their own minerals?

OM in the News: China’s Lithium Supply Chain Strategy

Lithium, a soft, silvery metal, is a component in the lithium-ion batteries that power electric vehicles and smartphones. By the end of the decade, demand could outstrip supply by some 300,000 tons, reports The Wall Street Journal (May 25, 2023).

Many Western companies have unwound their assets in Zimbabwe, which has been under U.S. and EU sanctions, but Chinese companies aren’t hindered by such concerns.

Chinese companies have long dominated lithium refining, but their hunt to secure a greater share of the world’s supplies of the metal is leading them to buy up stakes in mines throughout the developing world as they face increasing resistance in Western countries. It is a risky strategy. China is spending billions on stakes in nations that have histories of political instability, local resistance and resource nationalism. Projects often face protests, regulatory delays and even cancellations. 

If China succeeds, however, it could secure access to 1/3 of the world’s lithium-mine production capacity needed by 2025. (It currently holds only 8% of the world’s reserves). China’s drive to secure a greater hold on the world’s lithium is fueled by concerns that its booming electric-vehicle industry could struggle to get access to supplies as tensions with the U.S. and its allies rise. Canada and Australia, with some of the world’s largest lithium reserves, have recently blocked new Chinese investments over national-security concerns.
In the past two years, Chinese companies have spent $4.5 billion acquiring stakes in nearly 20 lithium mines, most of them in Latin America and Africa. Those include investments in countries such as Mali and Nigeria, where they face security threats from terrorism, and places such as Zimbabwe, Mexico and Chile, which have tried to gain greater control over their mineral resources. Zimbabwe recently imposed an export ban on unprocessed lithium, effectively forcing foreign companies to process it there. Mexico just signed a decree to fast-track nationalization of its lithium reserves.
Chile, along with Bolivia and Argentina, is also discussing the creation of a lithium cartel, similar to that of OPEC. Despite the challenges they face, Chinese companies have advantages over their Western counterparts. CATL, for example, is a battery giant, with the political backing of Beijing and a strong network of companies along the supply chain.
Classroom discussion questions:
1. What other rare earths and minerals are needed in the EV and electronics global supply chain?
2. What is the U.S. strategy for dealing with these minerals?

OM in the News: EV Plans Hinge on Made-in-America Batteries

Companies and the U.S. government are shelling out billions of dollars to establish a supply chain for batteries in North America, a manufacturing effort that is critical to the auto industry’s long-range plans to put more electric vehicles on the road.

Batteries are the most expensive component in an electric vehicle, accounting for about one-third of its cost, reports The Wall Street Journal (Feb. 7, 2023).

Lithium, produced at this site in Nevada, is among the minerals that are crucial battery components.

American electric-car makers traditionally haven’t assembled batteries themselves. They rely on a far-flung supply chain. The raw materials are mined primarily in countries such as Australia, China, Congo and Indonesia. Chemical processing, battery components and assembly are mostly done by Chinese companies.

A recently passed law provides incentives for North American-built batteries and penalizes car companies that source batteries abroad, is spurring a wave of new projects in the U.S.—from cell-making factories to new ventures to mine the raw materials.

The U.S. also announced awards totaling $2.8 billion to about 20 companies in more than 10 states to help expand domestic manufacturing of batteries for electric vehicles and the electrical grid. The money will go to projects that process lithium, graphite and other battery materials, manufacture components and demonstrate new approaches, such as producing components from recycled materials. The projects will specialize in building up the supply of particular materials and components, with a goal of lowering U.S. battery manufacturers’ reliance on foreign supply chains.

Assembling the battery cells that are embedded in vehicles is only one part of a process that typically involves multiple companies and can be geographically dispersed across continents. In the first step, mining companies extract raw materials such as lithium, nickel and other minerals, which have risen in value as demand for green energy grows. Then, other companies—often in other countries—process the minerals. Next, other specialized companies build components such as anodes, cathodes, separators and electrolytes. A fourth step involves the production of battery cells that house the components, including electronics and sensors that help manage a battery. These specialized companies that make components such as anodes and cathodes are crucial to the industry’s growth in the U.S.

Classroom discussion questions:

  1. Why is the transition to U.S. production of batteries slow and expensive?
  2. Why does the E.U. oppose “made in the U.S. ” battery limitations?

OM in the News: Battery Supply Chains

For the first time in more than a decade, the cost of an electric car battery is set to rise this year, reports The Financial Times (Oct. 10, 2022). Soaring prices for battery raw materials — such as lithium, cobalt and nickel — have led to the reversal of a long-held trend towards cheaper cells, which had seen costs come down from $1,220 per kilowatt-hour in 2010 to $132 per KWH last year. And a return to more expensive batteries, alongside a supply chain squeeze, calls into question how quickly electric vehicles can become affordable mass-market products — at a time when transport still accounts for a quarter of the carbon dioxide emissions that are a driver of global warming.

Some carmakers are going directly to lithium mining companies to source raw materials

This means that carmakers will experience prolonged production disruptions, akin to those caused by semiconductor shortages over the past two years. So, faced with constraints on their ability to acquire raw materials, some companies are planning to take over the buying of vital inputs themselves, rather than leaving it to a vast base of suppliers.

Tesla was the first carmaker to venture onto this path in 2020, saying the company would intervene directly, where necessary, to supplement the supply of battery materials.  The EV maker has applied for tax breaks to build a potential lithium refinery in Texas or Louisiana. Such a move is seen as necessary to achieve Tesla’s ambition of 20 million electric car sales by 2030.

It comes with great risk, though. Lithium refining — complex chemical processing — is a far cry from the carmaker’s core expertise of designing vehicles (see Chapter 2’s discussion of core competence), and relies on the company being able to secure a type of lithium ore known as “spodumene”.  (Prices of lithium hydroxide, the refined product, have skyrocketed to more than eight times the level of the start of 2021 at almost $70,000 per ton, close to record highs.) Ford, GM, and Stellantis are following Tesla’s path in investing in lithium mines.

Battery costs are forecast to be $138 per kilowatt-hour in 2024 — the same level as last year. A cost of $100 per KWH is viewed as the level that will make EVs affordable. Industry advancement rests on batteries getting more powerful and cheaper and cheaper every year.

Classroom discussion questions:

  1. Should automakers go out and buy lithium mines? Why or why not?
  2. Why is this an important OM issue?

OM in the News: Inside the Race to Power Electric Vehicles

Atop a long-dormant volcano in northern Nevada, workers are preparing to start blasting and digging out a giant pit that will serve as the first new large-scale lithium mine in the U.S. in more than a decade — a new domestic supply of an essential ingredient in electric car batteries and renewable energy. The mine, on federal lands, could help address the near total reliance on foreign sources of lithium.

But the project, known as Lithium Americas, has drawn protests from a Native American tribe, ranchers and environmental groups because it is expected to use billions of gallons of precious ground water, potentially contaminating some of it for 300 years, while leaving behind a giant mound of waste

lithium mines

The fight over the Nevada mine is emblematic of a fundamental tension surfacing around the world: Electric cars and renewable energy may not be as green as they appear, writes The New York Times (May 7, 2021). Production of raw materials like lithium, cobalt and nickel that are essential to these technologies are often ruinous to land, water, wildlife and people. In addition to Nevada, businesses have proposed lithium production sites in California, Oregon, Tennessee, Arkansas and North Carolina.

Traditional mining is one of the dirtiest businesses out there. Its environmental toll has often been overlooked in part because there is a race underway among the U.S., China, Europe and other major powers. Echoing past contests and wars over gold and oil, governments are fighting for supremacy over minerals that could help countries achieve economic and technological dominance for decades to come.

“Our new clean-energy demands could be creating greater harm, even though its intention is to do good,” says the head of a group that vets mines for carmakers.

Classroom discussion questions:

  1. Why is this an OM issue?
  2. What is China’s strategy regarding “rare earths” such as lithium?

OM in the News: “The ICE Age is Coming to an End”

Yes, that’s the quote in The Wall Street Journal (Feb. 6-7, 2021). But its not what you might think. It refers to the internal combustion engine, which over 100 years has been engineered to near perfection. The innovation of the battery-powered electric vehicle, by contrast, has barely begun. Still, car experts believe battery-powered models—which are mechanically much simpler than those with gasoline engines—will prevail. Batteries recently scored a win at GM, which is phasing out gas powered vehicles by 2035.

The rise of rechargeable batteries is now a matter of national security and industrial policy. Control of the minerals and manufacturing processes needed to make lithium-ion batteries is the 21st-century version of oil security. The flow of batteries is currently dominated by Asian countries and companies. Nearly 65% of lithium-ion batteries come from China. By comparison, no single country produces more than 20% of global crude oil output.

Assembling lithium-ion batteries in Huaibei, China

To meet expected demand, global output of lithium, a metal also used to make nuclear bombs and treat bipolar disorder, has tripled in the past decade. Lithium is mostly mined in Australia and Chile. EV battery packs and motors currently cost about $4,000 more to manufacture than a comparable fossil fuel-burning engine. But by 2022, the difference will be $1,900—and will disappear by 2025. VW, Tesla, and GM are pushing battery prices down further as they race to lock up the giant capacity needed to power millions of EVs.

 Last year, the U.S. established a consortium of agencies to promote a domestic battery industry, and used the Defense Production Act to speed development of mines for rare-earth elements. The U.S. Energy Secretary just stated, “We can buy electric car batteries from Asia or we can make them in America.” The E.U. is also using industrial policy to foster the development of a regional battery sector, saying it wants a “closed value chain for battery cells to be created in Europe” from processing raw materials through recycling used batteries.

Classroom discussion questions:

  1. About 4% of car sales last year were EVs. Why was that figure so small and why might it change?
  2. Why is the supply chain strategically important? (See Ch.11 in your Heizer/Render/Munson text)

OM in the News: Everything You Should Know About Lithium

Lithium is neither cheap nor easy to mine at this Nevada site

Lithium: “a metal crucial to what bankers, regulators, and clean-energy advocates see as the imminent transformation of the transportation sector and the electric grid,” writes Businessweek (April 3-9, 2017).

The lightest metal on the periodic table of the elements and a superb conductor, it’s what gives the lithium ion batteries in our cell phones, laptops, Priuses, and Teslas the ability to recharge more times, last longer, and provide more energy per weight or volume than other battery chemistries. (The lithium in a Tesla costs around $500). It’s also what makes devices explode if their battery-management systems aren’t working properly, as in many hoverboards or Samsung’s Galaxy Note 7.

How is lithium changing transportation? Chinese battery and auto manufacturer BYD just build its first American bus factory near LA. The buses are lithium-intensive; each uses about 8 times as much as an average electric vehicle, which in turn uses about 10,000 times as much as an iPhone. The vehicles are more expensive than ones that run on diesel or natural gas, but only initially. After 3 to 5 years, customers save $50,000 to $75,000 per year per bus on fuel and maintenance.

In Shenzhen, 20 miles north of Hong Kong, thousands of electric buses draw wind power from the grid overnight, when residential and business customers aren’t using it, and then disperse it during the day as they drive around the city. A shift toward electric vehicles is under way in Europe, as well. BMW and Daimler have each invested hundreds of millions of dollars in electrifying their fleets, moves that help drive the European Union’s policies. And China’s broader electric auto market will soon dwarf them all. Although electric vehicle adoption has been slower in the U.S. than expected, the price of battery packs has been dropping fast, to the point that electric cars are poised to become cost-competitive with gas-powered vehicles.

Classroom discussion questions:

  1. Why is lithium so important in manufacturing?
  2. Lithium prices have increased from $4,000 per metric ton in 2014 to $20,000 today. Why?