“The ecological transition shift our dependence on hydrocarbons to dependence on metals.”

5 July 2017

Storage batteries, batteries for electric vehicles, but also wind turbines and solar panels… The demand for metals, in particular cobalt, lithium and copper, is growing rapidly and is becoming more and more pressing. In this respect, the global energy transition brings with it new supply issues and the need for new strategies. Especially since greenhouse gas reduction objectives, whether common or national, tend to establish these new challenges in a sustainable way. Didier Julienne, an expert in natural resources, gives Louise Rozès Moscovenko from Enerpresse her insight into these new challenges.

Published in Enerpresse 05 07 2017

Enerpresse – Demand for cobalt, lithium and copper, particularly for electric vehicle batteries and energy storage batteries, is exploding. What is the state of the world’s resources of these materials?
Didier Julienne – I explained at length why and how the ecological transition was changing us from a dependence on hydrocarbons to a dependence on metals necessary to generate, transport and store electricity. It is therefore not only electric vehicle batteries that consume these metals, but the whole range of electricity generators, particularly those for climatic electricity, but also interconnections and finally batteries. It is also worthwhile to go back over some basic concepts.
What is an abundant metal? It is a metal that has been sufficiently worked on, i.e. the tools of a national natural resources doctrine have been widely used for its production and consumption: it has been researched and discovered by a dynamic industrial fabric and an inventive raw materials diplomacy. Then a range of technologies proved opportune to extract it from the soil, refine it and use it in decreasing unit quantities and increasing uses; finally it is recycled.
But this abundant material can become sensitive if one of the previous steps is defective. When, for example, demand rises, including for speculative reasons, and supply falls behind before catching up. Thus, rare earths were experimenting with a bell-shaped price curve: illustration of a speculative tension in 2011 followed by a decline that the industrial buyer, for example in automotive, must know how to manage in his stocks. The cautious consumer with a long memory will regularly question the supply/demand balance and after examination, if he is not reassured, he will classify the metal as a critical metal: cobalt and lithium have undoubtedly passed into this category; as soon as the increase in consumption via electric vehicles or a prolonged accident in production takes place they risk becoming critical metals and some already classify them in this category. A critical metal is at high risk of deficit without scientific breakthroughs allowing substitution. In addition, this small metal is often a secondary metal of a major metal, for example indium will come from the zinc mine, gallium from the aluminium mine, rhenium from the molybdenum mine itself from the copper mine as well as cobalt, rhodium from the platinum mine in South Africa but from the nickel mine in Russia… In the disorder, these materials are: platinum, palladium, rhodium, rhenium, antimony, beryllium, fluorite, gallium, germanium, graphite, indium, magnesium, niobium, certain rare earths, such as neodim, or prazeodim, tantalum, tungsten, lithium, cobalt, tellurium, copper… Note that a metal is critical for an industry or for a country, but in another industry or another country it will not be so and it changes over time.
Finally, a strategic subject moves away from geological or market criteria. It is an indispensable resource for national defence or for the State’s essential political ambitions. Iron ore, copper and sand are abundant but they were strategic for the steel, infrastructure and concrete used in China’s urbanization policy. In France, with the exception of uranium, which benefits from a law, a decree and classified directives, there is strictly speaking no other strategic subject. At European level, without a common energy policy, a subject may be strategic for one European country but will not be for the other, and this changes over time. Disturbing ideology? Without Russian gas, how can the strategic French uranium be combined with the strategic German lignite and the strategic Polish coal in a European energy policy?
Thus, new generation batteries and accumulators will consume more and more critical metals, but the danger is that suddenly these materials will combine this critical industrial aspect with a strategic state character. When this situation is identified, the problems begin because most often the states in question find out without any prior preparation that they do not have access to the natural resources (lithium-cobalt) of the policies (energy transition) they have decided.

Where are they mainly located?
Access to these resources is located, for example, for lithium in the Andean triangle – Chile, Argentina, Bolivia – but also in Australia. Cobalt is a by-product of the DRC copper mine. Copper, on the other hand, is present in many countries. When considering the production and potential shortage of these metals, we must not use paradigms such as the Cold War or those built by the oil world. These thought patterns are obsolete. Indeed, just like the gradual increase in oil demand, if steel consumption was a slow contagion from the construction of the Eiffel Tower to the construction of Chinese vertical cities, critical metals that have become strategic are suffering a pandemic, everyone wants them, in large quantities, for everything, everywhere and at the same time. There is a risk that there will not be enough for everyone and we are therefore entering a new world of competitive consumption: the allocation of strategic and critical resources is decided by the producer country and no longer by the consumer armed with his price. It is in this context that evoking hypotheses of a “raw material curse” is a particularly outdated or even primitively unreasonable view.
Are there any geopolitical issues around these resources?
The companies, administrations, managers, and students with whom I work are still passionate about this geopolitics of natural resources, I called it a few years ago the “new Great Game”. States that produce natural resources (energy, metals, agri-food) are sovereign over a soil or subsoil, and sometimes have a doctrine that will guide their strategies and economic development. Often, the raw materials exploited are identified with the national heritage and merge with the identity of the inhabitants. The doctrine of these producing countries is based on the power of sovereignty, the nationalism of resources.
Opposed to producer countries, consumer countries will have a raw materials doctrine based on influence to obtain supplies or even on the circular economy to better consume or recycle. There is a wheat doctrine in Egypt, the Common Agricultural Policy, Japanese or German energy doctrine, French nuclear doctrine, etc. China is a recent example when you look at how it has been acquiring its raw materials for 30 years. In this country, economic intelligence has long and successfully supported the search for sovereignty in energy, metals and recently in agriculture. The starting point of this strategy dates back several decades as it concerns the initial training of the ruling elite. It is easier to achieve sovereignty in mineral-energy-agriculture when the school and university have taught you the way: you know what you are talking about.
Obviously, the sovereignty strategies exercised by consumer countries have met the power strategies exercised by producer countries. These confrontations between sovereignty and influence are in the background of many geopolitical events and the behaviour of the companies with which I work.

To what extent can there be a shortage?
No one has an interest in developing a shortage, but an accident can always happen when the two strategies described in the previous question are in conflict. Everyone will remember the tensions around rare earths between China and Japan in 2010 (China, which exploits more than 90% of the 17 rare earths, including heavy rare earths, in its subsoil had suspended its exports to Japan as a means of pressure, editor’s note), and everyone will remember that they were originally created by the arrest of a Chinese trawler captain. In the current configuration, the most likely shortage will result from a globalized implementation of a global energy transition without steering and putting pressure on the mining resources needed for electricity. Already, a metal is attracting attention because of its complicated mining production prospects and the geopolitics of its transformation: cobalt. Its production prospects are up by 10% while those of its consumption are twice as high, the deficit is announced.
China has positioned itself well on raw materials, particularly on cobalt, on its land but also in the Democratic Republic of Congo, is it not a kind of dangerous monopoly?
More than 50% of world cobalt consumption is Chinese, and battery production accounts for 50% of world cobalt consumption; it is mainly Chinese and, given the progress made in this field over the past 15 years, will probably remain mainly located in this region in the future. 99% of Chinese cobalt comes from the Democratic Republic of Congo and it is the future that guided China Molybdenum’s recent acquisition of the TFM mine in that country. The essential cobalt is a by-product of copper, which is also essential for China for other reasons; cobalt production and prices will be dominated by those of copper. Let us also note in passing the acquisition of a stake by the Chinese company Tianqi in Chilean SQM, the world leader in lithium production. It is true that lithium prices have never been as high as in 2016 and that the current limits of its production are more administrative than geological in nature.

It must be remembered that the great danger that ideologies face is to exclude themselves from life, to no longer understand the impact they have on populations. Thus, globalization has excluded millions of people. I am sure it would be regrettable if the ideology of ecological transition no longer understood the impact it has on populations: for example, the alternating even/odd traffic that was perceived as a punitive ideology before the Critair vignette restored equity, or the punishment for landscape lovers and impoverishment for local residents represented by the incessant multiplication of wind turbines. But above all, I say and write that the ecological transition is shifting us from dependence on hydrocarbons to dependence on metals. It would be unforgivable if the energy transition were to lose its link with the industrial world, which must nevertheless implement technical solutions based on this same ideology. Is it not difficult to answer the following questions: how many “electricity-ecological” products have been designed by ecological movements? Is it healthy for a country not to be able to manufacture its own energy transition instruments such as solar panels? China has gained significant access to cobalt mines in the DRC, but it is a monopoly that must be viewed with caution. China is almost the only battery manufacturer of the future and it is logical to have access to more than 50% of world production. We have the engineers and an industry capable of manufacturing batteries. Without asking ourselves too much about why they have not been able to maintain the top positions over the past 40 years, it is time for them to take them back and for us to set up a diplomacy geared towards access to natural resources, using natural resource skills that are not artificial because they will really come from trading, the metal industry and the company.

Several lithium deposits are or are tending to be exploited in Europe, such as in Serbia with Rio Tinto, in the United Kingdom with Cornish Lithium, or in the Czech Republic with European Metals, what do you think of this potential? Is it important for Europe to be able to rely on this market too?
As part of the energy transition, it is more than desirable for Europe to be able to transform metals from its own subsoil. France, unlike other countries, would have the opportunity to do so from a carbon-free nuclear power source. Otherwise, our dependence would be twofold, on the one hand on the resource extracted mainly from the southern hemisphere (copper-cobalt-lithium) and on the other hand on products (accumulators) manufactured in particular in China.
To do this, junior companies with European capital such as Neometal wish to explore in Europe at this time. However, they face cultural difficulties and will be forced to find funding in countries that understand mining logic. For example, the money will come from Australia, South Africa, China and rarely from Europe. However, these facilities have a downside, as European production financed by non-European capital carries the risk of being exported and consumed outside Europe. Another difficulty is that some stakeholders convey the idea that opening mines in Europe is useless since it is possible to receive them from the other side of the world. This attitude favouring exotic resources is naturally anachronistic to a metropolitan vision. It would be better to promote an energy transition thanks to our national resources, France is rich in many metals.

Are there any new lithium, cobalt and copper mining projects underway?
Cobalt, no. Lithium, yes, in Australia. Projects exist to support Andean production, some are already in production or close to this stage but not all will reach maturity. Some will be constrained by the wealth of the deposit and its corollary, market prices that must absorb production costs. Copper production has been limited for various reasons for several years to around 20 million tonnes while consumption has been steadily increasing. Zinc is in an even worse situation. Finally, climate energy projects are so important on a global scale that we can also question the availability of steel or concrete production capacities.

According to figures released by Bloomberg in early June, the price of cobalt has risen by 71% since the beginning of the year. As for lithium, its price increased by nearly 60% in 2016. While many countries have set ambitious targets for clean mobility, is this soaring price not problematic, especially since one of the arguments in favour of EVs is that vehicle prices will fall, thanks in particular to lower battery prices?
If no policy related to these metals has been put in place as part of the energy transition, it is indeed bad news to see that the supply of these strategic metals is the most important part of the manufacturing cost of these batteries, around 60%.

Could recycling be a solution?
Battery recycling is a real industrial challenge because its processes are the source of innovations with important capitalist stakes and flows where geography still mixes with geopolitics. It is therefore useful, but the answer to this question may be negative for three reasons. As long as the material to be recycled is available in 10 or 20 years when the current products reach the end of their life, recycling will be delayed in relation to immediate needs. Secondly, the main characteristic of some mines is that they are polymetallic: several metals are contained in the ore, such as the 18 metals and substances extracted from the Norilsk Nickel mine in Russia; there is generally one major metal and minor metals. It is sometimes a feat of modern chemistry to separate them. Recycling, on the other hand, exploits the urban mine; it is a deposit that can be characterized by a superlative of low-grade mega-polymetallic. The number of metals mixed with each other is much higher than what is found in nature and these alloys have absolutely nothing natural. The chemical industry will be less able to separate them because, thirdly, thanks to technological progress, the quantities to be recycled are increasingly smaller and that is why recycling costs are becoming uneconomical. It is not the same thing to recycle the strapping of a carriage wheel three hundred years ago to make a new strapping of a new carriage wheel, as to recycle plastic, metals and all other materials from a mobile phone, an electronic card, a catalytic converter, a computer hard disk….

What about the materials needed to deploy renewable energies?
When we talk about energy transition, some people do not realize that it is neither the sun nor the wind that produce electricity, but the materials embedded in solar panel systems and wind turbine turbines that transform light and wind into electricity. Silicon for solar panels is available, but this is less the case for gallium or indium or rare earths. Not to mention that a wind or solar power plant is useless without the infrastructure of metals and materials that will transport and store electricity.
At this stage of the ecologically driven energy transition, given the intermittency of climate energies, it is crucial to reflect on the price of electricity no longer in euros per kWh but in kilos of copper, concrete, steel, etc. needed to actually produce one kW using a wind turbine or solar panel. It would obviously be necessary to include in this calculation the metals necessary for example for grid connections. This is one of the reasons why we must find much more efficient climatic electricity as quickly as possible, but without giving in to gigantism to make the most of these natural metal resources. There is no reason why French and European engineers should not succeed.