Supply chains at risk as the world moves toward electrification

A recent Telegraph article suggests the West is sleepwalking into missing the next industrial revolution as China voraciously buys up raw material assets around the world. Those assets include securing its future supplies of cobalt, copper, lithium and other metals. The aforementioned comes in addition to its current domination of rare earth metals.
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China leads in race for raw materials

electric vehicle charging
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Although the Telegraph article focuses on the UK, the UK is not alone.
Other European countries, and even the US, are only just catching on to the perilous state of most Western economies’ reliance on very limited, and often hostile, supply sources for raw materials.
As the article reports, it takes seven years to plan and build a mine. In the last four years, China Molybdenum has plowed into the Democratic Republic of Congo’s 350 kilometer copper belt. The firm paid $2.6 billion (£2 billion) four years ago for the Tenke Fungurume mine from Freeport McMoRan.
It then expanded its empire in December, paying another $550 million for Freeport’s nearby Kisanfu mine. The mine gave it access to a further 6.3 million metric tons of copper. In addition, the mine offers access to 3.1 million metric tons of cobalt.
Chinese companies now dominate mining in the central African country that produces 70% of the world’s cobalt.

EVs to boost demand

China’s strategic moves are not hard to understand.
Demand for metals like copper, cobalt, nickel and lithium will rise sharply in coming years. Maybe not with the imminent demand late last year’s bull run in prices, widely perceived to be in part on the back of anticipated electric vehicle (EV) growth — but in the medium term, demand will rise as surely as night follows day.
The World Bank estimates 3 billion tons of minerals will be needed in the overhaul to meet Paris climate agreement targets by 2050. That includes a fivefold increase in demand for some products, according to The Telegraph.
More specifically, the Faraday Institution estimates the UK will need 14,000 tons of cobalt, 75,000 tons of lithium and 86,000 tons of nickel to produce 92 Gigawatt hours (GWh) of electric vehicle batteries in 2035 if it is to maintain an automotive industry.
That compares to below 2,000 tons today.
There will be a knock-on effect. Car makers in Germany, France, Italy and elsewhere will wake up to the same issue. As a result, Benchmark Minerals Intelligence forecasts a global deficit of 216,000 tons of cobalt by 2030.

Preparing for the future

Western governments are pouring billions into supporting the setup of Giga factories and subsidizing the uptake of EVs. Some, like the UK, are even mandating the end of internal combustion engine (ICE) vehicles by the end of the decade.
However, if automakers are going to thrive in a post-ICE world, they are going to need a robust supply chain.
That means one not built on raw materials and parts from or under the control of countries like China and Russia, patently antagonistic business partners when political tensions run high. Those are tensions the West often stokes with sanctions on individuals and arbitrary tariffs on whole product areas.
In a politically fractious world, the buildout of a sustainable mine to forecourt or wind farm supply chain is the only answer. That is not to say a philosophy of “every country for itself” should hold sway. Rather, the buildout will require cooperation with like-minded partners.
In other words, the way global supply chains worked for decades in the last century before governments, rather than companies, began to control sources of supply.
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