First, the growing demand and competition for battery metals, not least in cobalt and lithium, will further constrict downstream actors’ ability to be selective when establishing supply chains. Analysts project the cobalt supply deficit to increase by 83% to 5,340 tonnes between 2018 and 202027. A compounding factor for supply bottlenecks is the long lead time in developing new mines (development can take up to 10 years28). Automotive industry representatives have also stated that supplies of lithium are of the greatest concern to carmakers, as production struggles to keep up with demand. Annual lithium production would need to grow by 94% over the next 20 years to satisfy the projected demand from the EV market29. What is more, lithium production is dominated by only four companies. Some experts see a potential risk of cartels developing in lithium and cobalt30.
Mismatches between supply and demand in the short and medium-term could increase producer leverage while weakening the downstream’s ability to re-direct supply chains away from high-risk producers.
What is more, the production and reserves of battery metals are either concentrated in a small number of countries, come from countries that have been identified as sources of responsible sourcing risks in earlier (see the Map in Figure 3 ), or both.
The lithium-ion battery market is also facing rising pressure directed at their responsible sourcing practices by the media, campaigning NGOs, a growing number of trade, regulatory and legislative bodies, and consumers themselves.
And public scrutiny – and with-it stakeholder awareness – around the responsible sourcing risks associated with battery metals will continue to increase:
Based on our experience in conflict minerals and the lessons learnt in the cobalt sector since January 2016 the following predictions can be made about battery metals:
The first three steps are already happening in battery metals. It is thus likely that more standards and initiatives specific to battery metals will appear, followed by increased debate on legislation.