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Guilty as Charged: EVs Threaten Lube Raw Materials


Guilty as Charged: EVs Threaten Lube Raw Materials

When a country relies as much as Germany does on imported raw materials to keep its factories humming, it keeps a nervous eye on global supplies and costs of metals and minerals. Five years ago, in a government-sponsored poll, 92 percent of German businesses cited fluctuating prices for raw materials and energy as their top problem, and 50 percent were worried about insecurity of supply.

For those in the lubricants industry, the coming shift to electric vehicles and their mineral-hungry batteries will only intensify such concerns, says Torsten Brandenburg of Germanys Federal Institute for Geosciences and Natural Resources.

Speaking in January at the 21st International Colloquium Tribology, Brandenburg observed that electric batteries are vying for several lubricant raw materials, sparking price hikes and adding allure to these commonplace minerals. Among them are lithium, the soft white metal used to thicken 75 percent of the worlds lubricating greases, and graphite, a well-known solid lubricant and extreme-pressure additive.

Germany has no native deposits of either mineral, nor of many other key metals used in electric batteries, such as cobalt, nickel and manganese. Yet for the country to be at the vanguard of the global shift to e-mobility, it must have secure access to these materials, he stressed.

E-mobility will change not just the automotive industry but many others, cautioned Brandenburg, who is based in Berlin and heads the Mineral Economics Unit of the German Mineral Resources Agency (DERA). DERA gathers intelligence and evaluates mineral resources while the Mineral Economics Unit is charged with analyzing the purchasing risks around specific minerals, evaluating supply/demand issues and threats, and developing price forecasts.

Leading the Recharge

How fast the changeover to e-mobility could happen is one of the critical variables DERA grapples with. For example, in December 2016, Matthias Wissman, president of the German Association of the Automotive Industry, stated, In seven to eight years, around 2025, around 15 to 25 percent of new registrations will be of electric cars. Others, like consultancy Wood Mackenzie, are more conservative, putting e-vehicles share at somewhere between 5 and 12 percent of global sales by 2025, from their current 2 percent.

DERA is not ruling out continued life for conventional diesel- and gas-powered vehicles. These will have a future, Brandenburg assured. But it foresees a wider range of vehicle types, with different battery sizes and needs, including hybrids which still burn fuel and so are more like a conventional car than like a full-electric car.

Looking solely at all-electric vehicles, the technologies begin to multiply. The roads will see an assortment of plug-in hybrids, range-extended electrics, battery-electric vehicles and, eventually, fuel cell vehicles, although this last category is still not expected to have a significant role by 2025, Brandenburg said.

Most batteries are now based on cobalt, nickel, manganese, lithium and graphite. All of these minerals need to have intensive chemical processing as well, to bring them up to battery-grade purity, he pointed out. Lithium carbonate and lithium hydroxide are used as the conducting agent for the electrolyte in rechargeable lithium-ion batteries, while the battery anodes require copious amounts of graphite.

Raw Power

How much of these materials will e-mobility soak up? Well, as the vehicle scales up so must the battery size, Brandenburg reminded the colloquium, which was organized by the Technische Akademie Esslingen in Ostfildern, Germany. A so-called micro-hybrid electric vehicle might need only a 0.4 kilowatt-hour battery, while a plug-in electric takes a battery 10 times that size and a medium-size electric vehicle carries 25 kwh under its hood. Going up the ladder, a city delivery truck could need 50 kwh of electric power, while a municipal e-bus can be expected to tote a battery array with 200 kwh.

The volumes required may be gauged from a look at the new BMW i3 electric car, Brandenburg suggested. Its battery consumes 12 kilograms each of nickel, manganese and cobalt, DERA estimates. More worrisome from the point of view of a lubricant formulator, it also needs 6 kg of lithium and 35 kg of graphite. Multiply that one vehicle by the millions expected on the roads by 2025, and you can see that it will be a huge demand for raw materials! exclaimed Brandenburg.

Much of the worlds attention is currently focused on adequacy of lithium supply for lithium-ion batteries. The electric vehicle market is expected to need 300 gigawatt-hours of battery power, even as other devices are also gobbling up lithium: power generation, aftermarket parts, portable equipment, handheld electronics and more. Your average smart-phone, at 0.1 kwh, hardly counts as a ripple in this market, Brandenburg said, adding, Is there enough growth in these raw materials to meet demand?

Common Earth

The lithium industry also is beset by a near-monopoly of supply, because although abundant in the earths crust, lithium is rarely found in economically recoverable volumes. Lithium is a small market and very concentrated, Brandenburg said. There are only five companies worldwide with large market shares, and just five companies with downstream processing capacity.

These players include Chilean minerals and fertilizer company SQM; Albemarles lithium division (formerly Rockwood Corp.); FMC Lithium; Australias Talison Inc. (majority-owned by Tianqi Lithium of China); and Galaxy Resources, also in Australia. Talison and Galaxy are spodumene (lithium ore) miners, while the others extract lithium from brine pools.

According to the U.S. Geological Survey, in 2007 lubricating greases took 16 percent of the global lithium supply, while glass/ceramics manufacturing and battery production consumed 20 percent each. More recently, USGS said greases share slipped to about 8 percent. And batteries, says lithium heavyweight SQM, now get more than 50 percent.

Global supply is around 33,000 tons a year now, Brandenburg recounted, and electric vehicles will need to have 60,000 tons. By 2025, DERA predicts, total production will have to rise to 104,000 tons a year, just to cover current needs plus the growth. Production, he emphasized, will have to triple in eight years.

Pricing for lithium is not set on any commodity exchange, as the Financial Times noted in a Feb. 17 article. Instead, the price is fixed by long-term contracts with buyers. Theres also a spot market in China, which leads the world in electric car sales.

For many years, lithium carbonate cost around $2,000 per metric ton but climbed to $2,500 in 2005 and since then hasnt looked back. From $6,500/ton in 2016, Brandenburg continued, the price continued to escalate, and now is about $15,000 per ton.

The uptick is attracting investors, who have opened some 22,000 to 23,000 tons of capacity in Australia, China and also South America. With other projects underway, the total supply could soon reach 110,000 to 157,000 tons a year. Most recently, in mid-January, SQM received permission from the government of Chile to quadruple its output by 2025 and extract an additional 35,000 tons of lithium a year from the Atacama Deserts salt flat. All these additions to capacity may ease the pressure on prices, said Brandenburg. We hope with new competition to see prices go down in the future.

Graphite is just as essential for lithium-ion batteries. Prices for flake graphite – which is processed into spherical graphite for battery anodes – were around $650/ton in 2016, and production volumes could reach a little over 1 million tons by 2025, DERA believes. The problem, said Brandenburg, is that China controls almost all of the supply. It has more than 70 percent of flake graphite production and supplies all of the worlds spherical graphite. At present there is overcapacity in China, but large new reserves have been located in Africa and may become productive. Meanwhile, the price for graphite shot up 31 percent over the past year, to nearly $960/ton, so that may also prod investments in capacity, he indicated.

Skyrocketing raw material prices will have an effect on lithium battery unit costs. And both price and supply security are needed if e-mobility is to thrive, Brandenburg said.

Assault on Batteries

Meanwhile, the race to supply lithium-ion batteries is spurring fierce competition for access to raw materials among rival applications, Brandenburg summed up. One problem, already seen in lubricants, is that processors have focused more of their efforts and resources on producing battery-grade materials, rather than the industrial grades that are adequate for many applications. This upscaling of product quality has led to lithium and other materials being priced out of the lower-grade markets, such as lubricating greases.

Raw materials for lithium-ion batteries are not geologically scarce, asserted Brandenburg. We will have enough of them for the transition to electric cars. However, he conceded, right now its a sellers market with prices rallying strongly for lithium and graphite.

New projects will come to fruition in the mid and long terms, but challenges remain to increasing production. This is acutely visible in products like lithium, which have high market concentration.

One major take-away, he added, is that if lubricant suppliers dont have a mitigation strategy to handle the peaks and troughs of supply and price instability, they should develop one without delay. Sustainable sourcing is imperative!