The ecological transition switches our dependence on hydrocarbons to metals dependency

Publication en français le 5 juillet 2017 dans Enerpresse

Storage batteries, batteries for electric vehicles, but also wind and solar panels … Demand for metals, particularly cobalt, lithium and copper, is growing strongly and is becoming more and more urgent. In this regard, the global energy transition brings with it new supply problems and the need for new strategies. Especially since the objectives of reducing greenhouse gases, whether common or national, tend to establish these new challenges in a sustainable way. Didier Julienne, expert in natural resources, gives Enerpresse an insight into these new challenges.

Enerpresse – The demand for cobalt, lithium and copper, particularly for electric vehicles and energy storage batteries, is exploding. What is the state of the world resources of these materials?
Didier Julienne – I explained at length (including before the French Académie back in 2012) why and how the ecological transition made us switch from a dependence on hydrocarbons to a dependence on the metals necessary to generate, transport and store electricity. It is not only electric vehicle accumulators that are consumers of these metals but the whole range of electricity generators, and notably those of climatic electricity, but also interconnections and finally batteries. Moreover, it is useful to look at some basic concepts.

What is an abundant metal? It is a metal which has been sufficiently worked, that is to say that the tools of a national natural resource doctrine have been widely used for its production and consumption: it has been sought and discovered by a dynamic industrial network and an inventive raw materials’ diplomacy. Then a range of technologies proved timely 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 matter can become sensitive if one of the preceding steps is failing. When, for example, the demand is ignited, including for speculative causes, and the supply lags before catching up with it. For example, rare earths were experimenting with a bell-shaped price curve: an illustration of a speculative tension in 2011 followed by a decline that the industrial buyer, for example in an automobile, must know how to manage in his stocks. The prudent consumer and with the long memory, will regularly question the balance demand / supply and after examination, if not reassured, it will classify metal as a critical metal

Once cobalt and lithium are consumed by electric vehicles or by a prolonged production accident, they are likely to become critical metals and some of them already fall into this category. A critical metal knows indeed high risks of deficit without scientific breakthroughs allowing a 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 that of aluminum; rhenium from that of molybdenum itself from copper mines as well as cobalt;  rhodium comes from South African platinum mines as well as from Russian nickel mines… In a disorderly classification these substances are: platinum, palladium, rhodium, rhenium, antimony, beryllium, fluorite, gallium, germanium, graphite, indium, magnesium, niobium, some rare earths such as dysprosium or praseodymium, and also tantalum, tungsten, lithium, cobalt, tellurium, copper … Note that a metal is critical for an industry or a country , but in another industry or country it will not, and it will change over time.

Finally, a strategic metal moves away from geological or market criteria. It is an indispensable resource for national defense, or it corresponds to the essential political ambitions of the State. Iron ore, copper and sand are abundant, but they were strategic for the steel, infrastructure and concrete used in the Chinese urbanization policy. In France, except for uranium which benefits from a law, a decree and classified directives, there is no strictly speaking any other strategic metal. At European level, without a common energy policy, a matter can be strategic for one European country but not for the other, and it evolves over time. Disturbing Ideology? Without Russian gas how to cohabit the strategic French uranium with strategic German lignite and 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 these materials suddenly accumulate this critical industrial aspect with a strategic state character. When this situation is identified the problems begin because the states in question often perceive without any previous preparation that they do not have access to the natural resources (lithium-cobalt) of the policies (energy transition) that they have decided.

Where are they mainly?
Access to these resources is for example located for lithium in the Andean triangle – Chile, Argentina, Bolivia – but also in Australia. Cobalt is a secondary product of the DRC copper mine. For its part, copper is present in many countries. When considering production and the potential shortage of these metals, neither Cold War paradigms nor those built by the oil world should be used. These thought patterns are obsolete. Indeed, as the gradual increase in demand for oil, if steel consumption was slow contagions from the construction of the Eiffel Tower to the construction of vertical Chinese cities, the critical metals that have become strategic undergo a Pandemic, everyone wants, in large quantities, for everything, everywhere and at the same time. It risks not having enough for all, and we are therefore returning to a new world of competitive consumption: the allocation of strategic and critical resources is decided by the producing country and not by the consumer armed by its price. It is in this context that the assumption of a “curse of raw materials” is a particularly outdated or even primitively unreasonable view.

Are there geopolitical issues surrounding these resources?
The companies, administrations, managers, and students with whom I work are always passionate about this geopolitics of natural resources, I called it a few years ago “new Great Game”. Natural resource-producing states (energy, metals, agri-food) are sovereign on land or underground, sometimes have a doctrine that will guide their strategies and economic development. Often the raw materials exploited identify 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 producing countries, consuming countries will have a doctrine of raw materials based on influence to supply themselves or even the circular economy to better consume or recycle. There is a wheat doctrine in Egypt, the Common Agricultural Policy, the Japanese or German energy doctrine, the French nuclear doctrine, and so on. China is a recent example of 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 because it concerns the initial training of the ruling elite. It is easier to achieve sovereignty in mineral-energy-agriculture when school and university have taught you the way: we know what we are talking about.
Obviously, the strategies of sovereignty exercised by the consuming countries have met the strategies of powers exerted by the producing countries. These confrontations between sovereignty and influence are in the background of many geopolitical events and behaviors of companies with which I work with.

To what extent can there be a shortage?
No one has an interest in the development of a shortage, but an accident can always happen when the two strategies described in the previous question clash. Everyone will remember the tensions around the 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 suspended its exports to Japan as a means of pressure, ed.), And everyone will remember that they were originally created by the arrest of a Chinese trawler captain. In the current configuration, the most probable shortage will result from a global implementation of a global energy transition without piloting and causing tension on the mining resources needed for electricity. Already, a metal catches the eye in view of its complicated mining 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 is well positioned on commodities, notably on cobalt, at home but also in the Democratic Republic of Congo, is not it a kind of dangerous monopoly?
More than 50% of the world’s cobalt consumption is Chinese, and the production of batteries accounts for 50% of world cobalt consumption; It is predominantly Chinese and given the advance in this area over the past 15 years it will probably remain mainly located in this region in the future. At 99% Chinese cobalt originated in the Democratic Republic of Congo and it is the future that guided the recent acquisition of the TFM mine in China by China Molybdenum. The indispensable cobalt is a by-product of copper, which is also indispensable for other reasons in China; the production and price of cobalt will be dominated by copper. We note also the participation of the Chinese company Tianqi in the 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.
It must be remembered that the great danger that ideologies encounter is to exclude oneself from real life and to no longer understand the impact they have on populations. Thus, globalization has excluded millions of people. I am sure it would be unfortunate that the ideology of ecological transition no longer understands the impact it has on people: for example, odd / even-numbered alternate circulation in Paris was perceived as a punitive ideology before the Critair Reestablishes equity, or the punishment for lovers of the landscape and the impoverishment for the neighbors that represents the incontinent multiplication of wind turbines. But above all, I say and write that the ecological transition switches from a dependence on hydrocarbons towards a dependence on metals and it would be unpardonable that the energy transition loses the link with the industrial world which must nevertheless implement technical solutions of this same ideology. Is it not difficult to answer the following questions: how many “green-electricity” products have been designed by ecological movements? Is it healthy for a country not to be able to manufacture its own instruments for an energy transition 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 virtually the only manufacturer of accumulators of the future, and logically accounts for more than 50% of world production. We have engineers and an industry capable of manufacturing batteries. Without asking ourselves too much about why they have not been able to retain the top spots in the last 40 years, it is time for them to resume them and for us to put in place a diplomacy oriented towards the access to natural resources, with the aid of non- factitious commodities competences because they will really come from the trading, the metallurgical industry and the business.

Several lithium deposits are or tend to be exploited in Europe, 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 that Europe can also count on this market?

In the context of the energy transition, it is highly desirable that Europe can transform metals from its own subsoil. France, unlike other countries, would have the chance to do so on the basis of non-carbon nuclear power. In the opposite case, 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 the products (accumulators) made especially in China.
To do so of the junior companies with European capital  wish to explore in Europe at the moment. However, they have to overcome cultural difficulties and will have to find financing in countries that understand mining logic. The money will be for example of Australian, South African or Chinese origin and rarely European. However, these facilities have a setback, European production financed by non-European capital entails the risk of being exported and consumed outside Europe. Another difficulty is that interest-bearers convey the idea that opening mines in Europe is unnecessary since it is possible to receive them from the other side of the world. This attitude favoring exotic resources is naturally anachronistic of 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 ongoing lithium, cobalt and copper mine projects?
Cobalt not. Lithium yes, in Australia. Projects exist to support Andean production, some are already in production or close to this stage but all will not reach maturity. Some will be constrained by the richness of the deposit and its corollary, the market prices which must absorb the costs of production. For its part, copper production has been limited for several years to around 20 million tons, while consumption is steadily increasing. Zinc is in an even more unfavorable 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 taken by Bloomberg in early June, the price of cobalt has increased by 71% since the beginning of the year. As for lithium, its price has risen by almost 60% in 2016. While many countries have set ambitious targets in terms of own mobility, is this price surge not problematic, One of the arguments in favor of EVs is that vehicle prices will fall, thanks in particular to the fall in the price of batteries?
While no metals-related policy has been put in place as part of the energy transition, it is indeed bad news that the supply of these strategic metals is the most important part of the manufacturing cost of these accumulators, around 60%.

Could recycling be a solution?
The recycling of accumulators is a real industrial stake because its processes are the source of innovations with important capitalist stakes and with geography flows still mixing with the geopolitics. It is therefore useful but the answer to this question may nevertheless be negative for three reasons. Provided that the material to be recycled is available in 10 or 20 years’ time when the current products reach their end of life, recycling will be delayed compared to immediate needs. Secondly, the main characteristic of some mines is that they are polymetallic: several metals are contained in the ore, such as metals and substances extracted from the Norilsk Nickel Combinat in Russia; there is usually a major metal and minor metals. It is sometimes an exploit of modern chemistry to separate them. For its part, recycling operates the urban mine; It is a deposit that can be characterized by a superlative of mega-polymetallic. The number of metals mixed with one another is much greater than that found in nature, and these alloys have absolutely nothing natural. Chemistry will be less likely to separate them, thirdly, thanks to technological advances, the quantities to be recycled are becoming smaller and therefore the recycling costs become non-economic. It is not the same thing to recycle the strapping of a wheel of a coach three hundred years ago to make a new strapping of a new carriage wheel, to recycle plastic, metals and all other materials of a mobile phone, an electronic card, a catalytic converter, a computer hard drive …

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 generates electricity, but the materials that are embedded in solar panel systems and turbines in wind turbines that transform light and The wind in electricity. Silicon for solar panels is available, but less so for gallium or indium or rare earths. Not to mention that a wind or solar power plant is useless without the infrastructure made up of metals and materials that will transport and store electricity.
At this stage of the energy transition, guided by ecology, given the intermittence of climatic energies, it is crucial to consider the price of electricity not in euros per kWh but in kilo of copper, concrete, Steel, etc. necessary to actually produce one kW using a wind turbine or a solar panel. It would obviously be necessary to include in this calculation the metals necessary, for example, to the connections to the networks. This is one of the reasons why we have to find as soon as possible climatic electrics much more efficient but without yielding to the gigantisme to make the best profit of these metallic natural resources. There is no reason for French and European engineers to fail

Didier JULIENNE

Linkedin: Didier Julienne

Twitter:  @didierjulienne

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