Car Industry Mingles with Miners in Blitz for Battery Materials

By Stefan Nicola from Bloomberg

A few weeks back, I wrote about Volkswagen getting back together with an old flame. Now it’s time to talk new relationships between unlikely partners.

Mining giant Glencore just bought a stake in Britishvolt, the U.K. startup that’s planning to build the country’s first large-scale battery factory for electric vehicles in northern England. While we don’t know how big Glencore’s stake is, the deal gives Britishvolt some much-needed corporate backing — especially since the company hasn’t announced any automotive customers yet.

It’s also the latest of several agreements indicative of increasingly close ties between mining and automotive companies as the car industry electrifies. My colleague Alejandra Salgado reported this week that EV makers have been exploring intermediary roles in mining to secure access to key battery metals. Tesla last month struck a nickel deal with BHP Group after Elon Musk expressed concern about supply due to challenges sourcing the metal in a sustainable manner. The EV maker also agreed to a cobalt pact with Glencore in June and inked a deal in late March to get involved in a nickel-mining venture in New Caledonia.

The key resource for many companies is lithium, the silvery-white metal that’s used in virtually all EV batteries. BloombergNEF expects lithium demand to grow five-fold by 2030 from this year’s levels. A global index of lithium prices has already doubled this year, rebounding from a decline that had started in mid-2018.

Stellantis has been in talks with two companies on securing lithium, which the Jeep maker rates as irreplaceable (unlike cobalt, for instance). Its French rival Renault already signed an offtake deal with Vulcan Energy Resources, which plans to get lithium out of geothermal brines deep below the ground in the Upper Rhine valley in southwestern Germany. I’ve recently talked to a pair of scientists at the Karlsruhe Institute for Technology who told me that the reserves in the region are among the most promising in Europe. In China, similar efforts are underway, handing a struggling Tibetan fertilizer firm a major market boost.

All of these efforts are part of a push by automakers to secure reliable and steady supplies of battery metals. These tie-ups are also great for mining companies, which will not only gain a lucrative new customer base but also greater visibility on what resources the car industry needs and in what amounts. Above all, carmakers want to make sure that a situation like the global chip shortage that has been derailing vehicle production for months doesn’t happen again as EV sales take off.

The push is about securing production and saving money, but also about geopolitical hedging.

Production and processing of minerals such as lithium, cobalt and some rare-earth elements is highly concentrated, with the top three producers accounting for more than 75% of global supply. A key player is China, which dominates processing of some rare-earth elements and is the world leader in manufacturing lithium-ion batteries. So it’s no wonder the International Energy Agency urged Western governments in May to consider stockpiling critical battery metals.

Beyond the politics, carmakers are also interested in sourcing the stuff as sustainably as possible to protect the “green” image of EVs. Cracking lithium out of rocks can be pretty taxing on the environment. The metal is usually sent from South America across the globe via container ships to Asia. Assembled batteries are then often exported to Europe.

Producing lithium locally from brines in Germany or France would result in a much smaller CO2 footprint, pleasing environmentally conscious consumers and investors alike.