East-West battleground will shift to metals

QPM Energy

26/12/2022 03:17

(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own. Updates to add graphic.)
    By Lisa Jucca
       MILAN, Dec 23 (Reuters Breakingviews) - The global trade
war will shift from fossil fuels to metals and raw materials.
Russia’s invasion of Ukraine highlighted the risk of relying on
autocratic states for energy. Even if Europe’s gas crisis eases,
Western manufacturers’ focus will switch to reducing China’s
dominance in materials key to a cleaner economy.     
    Europe needs to cumulatively spend $5.3 trillion on clean
energy projects by 2050. That requires a sixfold increase in the
global production of copper, lithium, graphite, nickel and some
rare earths by 2040, International Energy Agency estimates show.
Yet China dominates the processing, and to a lesser extent the
extraction, of many critical industrial ingredients. It refines
58% of lithium produced globally, 65% of cobalt and over
one-third of nickel and copper. Ostracised Russia is also big in
nickel, palladium and cobalt. Europe, which imports between 75%
and 100% of most metals, looks particularly vulnerable.  
    In response, Western companies can strike deals with
suppliers in friendly countries, open mines at home, or boost
recycling. The first approach is the fastest and is underway. In
2022 carmakers have ramped up partnerships with mines and
invested directly in mining projects, data from Fitch Solutions
shows. General Motors  GM.N  took a stake in Australia’s
Queensland Pacific Metals  QPM.AX  to secure nickel and cobalt
for green SUVs.   
    Opening new mines at home looks safer but takes longer. Take
lithium. Europe doesn’t currently mine an ounce of the key
electric-vehicle battery component. And the United States
only supplies 2% of global demand. But things are changing.    
    Sibanye Stillwater  SSWJ.J  is aiming to operate Europe’s
first lithium mine in Finland in 2025; France’s Imerys  IMTP.PA 
is seeking to extract 34,000 tonnes of
lithium hydroxide annually from a mine opening in 2028. If all
European lithium mining projects transpire, they
could supply around 40% of its expected demand of 600,000 tonnes
of lithium carbonate equivalent a year by 2030, says one
European miner. The United States, which only holds 3% of the
world’s lithium reserves, has passed legislation to subsidise
domestic extraction of crucial materials.      
    Neither approach is foolproof. Mining in developed markets
may mean pushback from environmentally conscious
citizens. Critical metals producers could also make life
trickier for buyers by forming cartels.
    That’s why Western nations’ best option is ultimately to
recycle metals from used appliances. Companies like Umicore
 UMI.BR  and Redwood Materials already own the technology to
reuse batteries and smartphones. Europe recycles 17% of
the globe’s battery production. But this share will rise to 48%
by 2025, Fitch Solutions suggests.    
    Unfortunately, recycling is costly. But in a polarised
world, protecting Western industries and jobs will merit a
premium.
    Follow @LJucca on Twitter
(This is a Breakingviews prediction for 2023. To see more of our
predictions, click here.)
    CONTEXT NEWS
    Europe would need to invest $5.3 trillion in new power
generation projects, particularly wind and solar, as well as
green hydrogen developments to free itself from fossil fuels by
2050, according to BloombergNEF estimates.   
    Total demand for metals and minerals critical to shifting
away from fossil fuels would need to grow by six times by 2040
to help the world reach global climate goals, according to
estimates from the International Energy Agency.    
    In 2019, China accounted for 64% of the global production of
graphite, 60% of rare earth elements, 13% of lithium and 8% of
copper, IEA data shows.   
    The People’s Republic also accounts for 87% of the global
refining and processing of rare earth elements, 65% of cobalt,
58% of lithium and 40% of copper.    
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Refining bottlenecks    https://tmsnrt.rs/3Po09vG
Race for minerals    https://tmsnrt.rs/3GgvywM
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by George Hay, Oliver Taslic and Sharon Lam)
 ((For previous columns by the author, Reuters customers can
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 | lisa.jucca@thomsonreuters.com ; 
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