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Local sourcing vital in UK, considering expected 70% jump in EV sales

22nd January 2021

By: Marleny Arnoldi

Deputy Editor Online

     

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Research agency Fitch Solutions foresees a good year for electric vehicle (EV) development and a key component thereof, lithium.

It says critical raw material (CRM) developments in the UK, the US and the European Union (EU) bode well for those regions’ battery supply chains and reducing their dependence on Chinese CRMs.  

Fitch Solutions previously highlighted the race to ensure the availability of strategic materials for the green and digital economy as a key theme for mining and metals in 2021.

The agency says lithium remains a pivotal raw material for the forecast accelerating uptake of EVs in the coming years, in particular for the assembly of batteries.

Most recently, in January 2021, a team of Penn State engineers has developed a thermally modulated, fast-charging lithium iron phosphate (LFP) battery. The LFP battery will offer upside to mass-market EV adoption by “relieving concerns surrounding range per charge, emphasizing our expectations for increasing lithium demand”.

Primary importing economies, such as the EU and the US, have increasingly implemented explicit policies to secure CRM sourcing and diversify away from China, following a multi-pronged approach.

Significant progress in domestic lithium extraction activities will add upside to the advance of diversification of the battery value supply chain, Fitch Solutions says.

It explains that the EU offers the most promising, near-term development of lithium extraction with several projects in the pipeline likely starting production around 2023.

The European Commission added lithium to its list of CRMs for the first time last year.

In January, Vulcan Resources released a prefeasibility study for its much-anticipated Zero-Carbon lithium project in Germany, citing its lithium resources as the largest in Europe.

The company has pioneered a lithium extraction technique using geothermal power which it claims emits no carbon dioxide, matching the EU's stringent climate agenda.

It is expected that the project will produce enough lithium for one-million EV batteries a year, with a possible production start in 2024, strengthening the EU’s capability to supply its domestic EV fleet.

Additionally, recent investment in Savannah Resources’ Mina do Barroso lithium project, in Portugal, will advance the project timeline by helping to finance the definitive feasibility study.

Savannah Resources in January this year reached a $6.4-million investment agreement with Galp Energia, which will enable Galp to acquire a 10% stake in Mina do Barroso.

Portugal is currently Europe’s largest lithium producer, accounting for 1.6% of global production in 2019; however, Portuguese lithium is not marketed to the auto sector, but instead ceramics and glassware.

However, while Savannah Resources CEO David Archer says the lithium oxide at Mina do Barroso will be well-suited for implementation in EV batteries, initial lithium oxide spodumene will be exported to China.

Therefore, Fitch Solutions emphasises that China’s maintained dominance in downstream activities will prove much more difficult for Europe to overcome.

The agency adds that the recent successful achievement of lithium carbonate production in the UK will boost the country’s potential to provide for its domestic supply chain in the longer term.

On January 18, 2021, Li4UK (Securing a Domestic Lithium Supply Chain for the UK) reported positive lithium production from two projects within the UK, including Cornish Lithium’s Trelavour project in Cornwall.

Li4UK is a project commissioned by the UK government to evaluate the viability of producing battery-grade lithium from domestic sources.

The initiative was carried out by a consortium which includes Wardell Armstrong International, The Natural History Museum and Cornish Lithium. Cornish Lithium is also trialing a pilot plant using a zero-carbon, direct lithium extraction technology, similar to that used by Vulcan Resources in Germany.

“Our autos team forecasts EV sales in the UK to surpass 296 000 units in 2021, representing year-on-year growth of 70.6%, and placing the UK as the third-largest European EV market by sales volume,” Fitch Solutions notes.

Within this context, a future increase in local content requirements, presents a risk to UK EV export competitiveness to the EU, highlighting the importance of investment in local sourcing, the agency adds.

As per the Brexit free trade deal, batteries may have a maximum of 70% of external content (outside of the UK or EU) to avoid tariffs.

Beginning January 1, 2024, the 70% requirement will be scaled down to 50%, with the risk of further tightening.

Fitch Solutions says that, should the maximum content requirement be reduced even further in the longer term, the impact would present a larger threat to the UK. This is owing to Fitch’s auto team’s expectations that the UK will be unable to realistically source the majority of its battery components domestically by 2024, forcing UK automakers to invest in EU supplies or face tariffs.

Additionally, the future availability of battery-grade lithium within the EU will also pose substantial risks to UK automakers.

Meanwhile, Fitch Solutions states that the US Bureau of Land Management on January 15 issued the record decision for Lithium Americas Corporation’s Thacker Pass lithium project, signalling a successful leap in the US reshoring of lithium extraction.

The project, located in Humboldt County, Nevada, is the largest known lithium resource in the country with six-million tonnes of lithium carbonate equivalent (LCE).

According to Lithium Americas, US battery production capacity will require more than 250 000 t of LCE by 2030, with Thacker Pass well-positioned to contribute at a competitive cost of $4 088/t of lithium.

Thacker Pass is expected to begin producing by 2023, making it one of the most advanced-staged lithium developments in the US.

Meanwhile, Albemarle – owner of the only currently producing lithium mine, in the US, Silver Peak – announced in January that it plans to double its production capacity by 2025.

The firm is also exploring the feasibility of lithium production from local clay resources, adding upside to medium-term lithium production in the US.

Australia will remain the number one global lithium producer in the short term, underpinned by strong government support and a robust project pipeline.

Australia accounted for 54.4% of global lithium production in 2019.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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