By Yusuf Khan
The International Energy Agency has called for greater diversity in the manufacturing of electric-vehicle batteries as well as the sourcing of their raw materials, with a view to avoiding bottlenecks within the global supply chain.
While demand for electric vehicles is surging, supply-chain risks continue to weigh on the industry, leading to a steep rise in prices, the organization said in a report on Monday.
“Policy makers, industry executives and investors need to be highly vigilant and resourceful in order to reduce the risks of supply disruptions and ensure sustainable supplies of critical minerals,” said the IEA’s Executive Director Fatih Birol, adding that there is “no room for complacency” in the industry.
EV sales including hybrids doubled in 2021 to a new record of 6.6 million, “with more now sold each week than in the whole of 2012.” In the first quarter of 2022, 2 million EVs were sold, up 75% compared with 2021.
In May, the price of lithium–a key component for EV production–was seven times higher year-on-year, the report said. If raw-material prices remain as they are, a battery pack will be 15% more expensive in this year than in 2021, it added.
Meanwhile, EV supply chains remain stretched. “Europe is responsible for over one-quarter of global EV production, but it is home to very little of the supply chain apart from cobalt processing at 20%.” Meanwhile, more than 70% of the world’s cobalt needed in lithium ion batteries is sourced from Congo, and more than 85% of anode production takes place in China.
“Russia’s invasion of Ukraine has created further pressures, since Russia supplies 20% of global high purity nickel,” the report added.
In response, more investment will be required in the industry, especially in the mining sector, alongside steps to improve battery recycling rates after 2030, the IEA said. While low prices for battery metal have been a disincentive for mining companies in the past, rising prices should begin to stimulate significant supply-side investment, it added.
Write to Yusuf Khan at [email protected]
