Supply Chain and Raw Materials for Growing Battery Production

Updated: Mar 23

Rapidly expanding demand for energy storage is putting high pressure on the value supply chain, more specifically on the availability and cost of the raw minerals involved in battery manufacturing.

Despite variation in battery chemistries, all Li-ion batteries use lithium (Li) for ionic transport during battery charge and discharge. Lithium metal is highly reactive and flammable under standard conditions, therefore it is mined and sourced for battery production as lithium carbonate, or lithium hydroxide (battery grade material), but often measured in lithium metal equivalents (LME). Typically, 1 kWh of energy storage requires 0.28 kilogram of LME. Per the U.S. Geological Survey most of the world’s lithium is being produced in Australia (14,300 tons), Chile (12,000 tons), Argentina (5,700 tons), and China (2,000 tons). Chile has the world’s largest lithium reserves (7.5 million tons - more than 50% of the world supply), followed by China (3.2 million tons) and Argentina (2.0 million tons). Although lithium is not classified as a rare element, until recently the lithium mining industry was mostly focused on maintaining a constant supply. Consequently, it is not prepared for the exponential growth in demand due to adoption of electric cars and renewables. This expanding demand has resulted in the prices of lithium nearly tripling since 2015. However, exploration and development of new lithium sources take a few years prior to profit, and it is anticipated that lithium prices will come down as soon as more supply becomes available. The quality of raw minerals is also a significant factor, as lack of battery grade materials was cited as one of the causes for delays in Tesla Model 3 production in addition to manufacturing challenges.

Battery shortages or poor quality of batteries could affect the ability of automakers to rapidly expand markets and meet electric car demand. Aggressive projections for energy storage capacity of 500 GWh/year by 2025 will require 140,000 tons of LME a year, nearly an order of magnitude higher than current production levels. For batteries to be available for automotive manufacturers in large volumes by 2020, battery cell and pack manufacturing capacity needs to be increased by 2019, which calls for immediate large investments in both new battery factories and mineral mines. All major automakers investing in their own battery factories are becoming worried about the raw material supply. Tesla Inc. has already signed a conditional supply agreement with US Pure Energy Minerals, which has claims on 9,500 acres of lithium brine in Clayton Valley, NV near the Tesla Gigafactory. Additionally Tesla is seeking to secure lithium supplies from Chile’s mines, and exploring the possibility of building another battery Gigafactory there. Chinese automaker Great Wall Motors also took a 3.5% stake in Australian lithium player Pilbara Minerals Ltd.

To circumvent the lithium sourcing bottleneck, other alkaline elements like sodium (Na), potassium (K) or magnesium (Mg) could hypothetically be used for ion transport instead of lithium. These elements are more abundant and easier to mine, but their performance (voltage and energy density) is currently less than that of Li-ion batteries.

Besides lithium, batteries also require anode and cathode materials, current collectors and packaging. The most common anode material is graphite (C). It is the largest input of raw materials: 1 kWh of typical Li-ion battery storage requires ~0.64 kilograms of graphite. Despite being one of the most abundant elements, graphite still has a scaling issue. Two types of graphite are used in Li-ion batteries: naturally mined flake graphite processed into spheres, and synthetic graphite produced from petroleum coke and tar pitch at very high temperatures. The forecast of battery graphite markets predicts increase in demand (natural and synthetic) from 100,000 tons in 2016 to 780,000 tons/year by 2025. China is dominating natural flake graphite production (62% of world production), followed by India, Brazil, Mozambique, Canada and the US. Synthetic graphite has superior consistency and purity (+99%) and in the early days of Li-ion batteries was the preferred choice because of higher reliability and performance, but it costs up to 10 times more than the best natural graphite. Due to natural graphite’s reduced production costs, environmental impacts and CO2 emissions, current battery manufacturers are trending towards using more of natural graphite anode in their cells, blending it with synthetic graphite. Silicon (Si) and silicon alloys are also emerging as high storage capacity anode material (~10X of graphite capacity), but due to rapid fading issues, present use is limited to blending of small fractions of silicon into graphite anode formulations. The source of pure silicon is silica in various natural forms which are abundant and adequate to supply growing energy storage needs for many decades.

The cathode material market for Li-ion battery cells is more dynamic with several compositions of complex transition metal oxides and phosphates, including cobalt (Co), nickel (Ni), manganese (Mn), aluminum (Al) and iron (Fe) in different proportions. Amongst these elements Co is the most expensive and the most rare. The fraction of Co in different cathode formulations varies, most commercial cathodes containing at least 10% of cobalt by weight. The price of cobalt has more than tripled in the past 18 months to trade above $90,000 a metric ton, with the battery industry using more than 40% of all Co produced. Cobalt reserves and production are extremely segregated, with 58% of supplies coming from the troubled Democratic Republic of Congo (3.4 million tons in reserves and 66,000 tons production (2016)), followed by Australia (1.1 million tons in reserves, 5100 tons production), Canada (270,000 tons reserves, 7,300 tons production), Russia (250,000 tons in reserves, 6200 tons production) and China (82,000 tons in reserves, 7700 tons production). The US has 23,000 tons in reserves and in 2016 produced only 690 tons of Co.

Cobalt is a by-product of nickel and copper mining, thus its production is dependent on the demand for those industrial commodities. This complicates long term planning for the EV supply chain. Five years ago the Co supply was considered to be in a perpetual surplus, but with rising demand in the rechargeable battery industry a significant supply shortfall is anticipated. Recent reports indicate that Apple is seeking contracts to buy cobalt directly from miners for at least five years in order to ensure supplies amid industry fears of a shortage driven by the electric vehicle boom. BMW is also close to securing a 10-year cobalt supply deal.

With increasing costs and availability challenges can batteries avoid using cobalt? Cobalt is used in battery cathodes in the form of lithium cobalt oxide (LCO), lithium nickel cobalt aluminum oxide (NCA) and lithium nickel manganese cobalt oxide (NMC). NMC cathode formulations are the material of choice in the near term for EV and utility storage batteries, as they provide higher cell voltage and energy density. Traditional NMC uses a 1:1:1 Ni:Mn:Co formula, however,nickel-rich formulations (5:2:3, 6:2:2 and 8:1:1) are now being introduced into lithium ion battery production lines around the world. Other cathode chemistries include lithium iron phosphate (LFP), lithium manganese oxides (LMO), lithium nickel manganese oxides (LNMO), and the most recent developments in lithium nickel manganese iron oxides (NMF) that provide high voltage performance while substituting expensive Co for cheap, abundant and non-toxic iron (Fe). It is likely that - as the cost of Co increases and availability decreases - battery manufacturers will switch to Co-free cathode compositions to further drive battery costs down.

Other elements used in Li-ion battery active materials, specifically nickel (Ni), manganese (Mn), iron (Fe) and aluminum (Al), are major industrial metals with well-developed mining infrastructure and competitive cost structure and are not expected to be an impediment to the development of the battery industry. While nickel metal is a commodity that is produced in the millions of tons a year, battery grade nickel sulphate is a specialty chemical mostly produced in China and with only a handful of non-Chinese producers, including Japan’s Sumitomo Metals Mining and Belgium’s Umicore. Other nickel miners seek to enter this market, but not all nickel deposits are commercially viable for production of battery grade material due to processing costs.

Copper also has been playing an important role in large scale battery manufacturing - although it is not used as an active energy storing element - as fully electric vehicles require four times as much copper as cars that run on combustion engines. The world’s top copper mines are aging and there have been no major discoveries in two decades, which likely will push the costs of this material up.

Another element that is often overlooked in discussions of raw Li-ion battery materials is phosphorus (P). It is used in Li-ion electrolytes in form of lithium hexafluorophosphate (LiPF6) and also part of LFP cathode used by A123 Systems and other Chinese battery makers. Phosphorous is a vital element for food production, with limited reserves that are not equally spread over the planet. The only large mines are located in Morocco, Russia, China and the US. The world’s phosphate rock reserves are estimated to last only for another 35 years, with more optimistic assessments relying on the discovery of new deposits.

The obvious solution to the limited supplies of raw minerals and their potential shortages is to recycle elements from old batteries, a process which will make the battery industry much more sustainable.

Contributors are Elena V. Timofeeva, Carlo. U. Segre and John P. Katsoudas.