Mining companies face supply chain review over US electric car loans

Mining companies face supply chain review over US electric car loans

Miners will have to scramble to expand their U.S. operations in record time to meet a deadline for sourcing key minerals locally or from a few countries, according to a bill likely to pass Friday, companies said. and industry experts.

The requirement is part of a broad bill that includes climate and clean energy policies and standards on materials for electric vehicle batteries, such as cobalt, lithium, nickel and graphite.

The US House of Representatives is scheduled to vote on the bill on Friday.

“Considering that it takes seven years to build a mine and a refining plant, but only 24 months to build a battery plant, it takes the better part of this decade to create an entirely new industry in America,” said Simon Moores. , CEO of Benchmark Mineral Intelligence.

The Inflation Reduction Act (IRA) includes a $7,500 tax break for new electric vehicles, but to get the full exemption, electric vehicle manufacturers have to stock up by 2023 on at least two-fifths of the battery materials in the United States or free trade agreement (FTA) partners such as Canada, Chile, and Australia, or recycle them in North America.

The guidelines exclude Indonesia and Argentina, two suppliers of key metals – nickel and lithium, respectively – and increase the material supply target to 80% by 2026. Automakers had lobbied Congress to expand the number of supplying countries. .

“The most feasible option is to turn to recycling … however, the impact of recycling will be very limited when there are hardly any electric vehicles on the road,” said Max Reid, an analyst at WoodMac Battery Raw Materials Service.

The United States is home to some of the world’s largest automakers, such as Ford Motor and General Motors, as well as auto parts suppliers, but manufacturing and refining capacity for batteries is limited.

Leading lithium producer Albemarle Corp, which aims to build a lithium processing plant in the southeastern United States later this decade, said the bill is a “positive step” in attracting investment for a supply chain. national.

“Electric vehicle credit terms and timing are challenging as the battery industry operates largely in Asia and the domestic supply chain is still developing,” an Albemarle spokesman said.

“Our Kings Mountain mine project and proposed megaflex production center in the southeast will help move the supply chain forward in the US, but this will take time.”

Rio Tinto, which has refining and smelting operations in Utah and Canada, said it “welcomed the domestic mining and processing provisions” and was working with auto customers.

Other large metals miners for electric vehicles (EVs), including copper miner Freeport-McMoran and Glencore, declined to comment.

New US mining projects have faced strong opposition from local communities and environmentalists, underscoring broader tension in the US as resistance to living near a mine collides with the potential of EVs. to mitigate climate change.

Chile’s Antofagasta, for example, saw the US Department of the Interior cancel leases for its proposed Twin Metals copper-nickel mine in Minnesota in January on environmental grounds.

The White House had also said last year that it planned to ban mining for 20 years in the Boundary Waters region of Minnesota, where Antofagasta hopes to build an underground mine.

“The opinion that you have to stock up in the country … will start to prevail and become more significant,” Antofagasta chief executive Iván Arriagada told Reuters.

“It is based on national security considerations, on the challenges posed by the energy transition and there is no way that the world will reach carbon neutrality by 2050 unless there are more raw materials.”

“There is a contradiction there, but the wave seems to be going in the direction of realizing that these projects have to be done.”

Efforts by the United States and Europe to build an independent supply chain of minerals for electric vehicles have accelerated with heightened tensions between the West and China and Russia, while the COVID-19 pandemic has highlighted the risks stemming from closures and supply chain shortages.

Companies are under pressure to reduce their carbon footprint, but complex battery supply chains require materials to traverse multiple continents at different stages of processing before a finished battery ends up in an electric vehicle.

The White House said last year it would lean on allies to secure minerals needed for electric vehicle batteries, saying the country “cannot and does not need to extract and process all critical battery inputs at home.” .

“Given that the market is global in nature and spot prices predominate, the major effect (of the bill) is to push companies serving the US market to deepen investments in the relevant NAFTA partners, namely Canada and Australia,” said Fitch Solutions commodity analyst Nick Trickett.

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