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Shortfalls seen for lithium, cobalt, copper
EU policy could prohibit emissions from cars by 2035
Recent decisions by the EU and California to limit new vehicle sales to cars with zero emissions will exacerbate short-term battery metal shortages, imperiling both initiatives, forecasts show.
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EU lawmakers reached an agreement Oct. 28 that will effectively ban the sale of new cars with internal combustion engines by 2035, following a similar decision by California in August. California and the EU hope to decrease their transportation contribution to global warming, but, taken together, the mandates put pressure on already tight supplies of the metals that are critical raw materials in rechargeable batteries and electric drivetrains.
Medium-term forecasts by S&P Global Commodity Insights show global shortfalls in lithium, cobalt and copper over the next five years as the mandate ramps up. But analysts and policymakers believe these shortages to be hiccups in the rollout of new vehicles, with metal recycling and increased US production expected to help close the gap before the 2035 deadline.
“There would be sufficient supply globally to meet the demand by 2035, many miners and refiners of these materials are already anticipating a national mandate from the US and therefore planning for supply requirements,” Matthew Burford, a research analyst at CRU International, told S&P Global.
The EU’s policy has yet to be formally adopted by its parliament, but it is expected to be enacted. The rule would require all new cars to produce zero greenhouse gas emissions by 2035, including a 55% reduction in emissions by 2030, increasing demand for EVs before the final deadline.
“This agreement will pave the way for the modern and competitive automotive industry,” said Jozef Síkela, minister of industry and trade for the Czech Republic, which holds the EU’s rotating presidency, talking about the policies. The agreement reached by lawmakers should give car manufacturers enough time to transition to zero emissions, Sikela said in a statement.
Similarly, in the US, California’s rules come with midterm goals — by 2026, 35% of new passenger cars must be zero-emission or plug-in hybrid, rising to 68% in 2030 and 100% in 2035.
Californians bought 1.85 million new cars in 2021, according to the California New Car Dealers Association, enough to rank it eighth among all countries. And the impact will likely be even greater, because other populous states such as New York tend to follow the Golden State’s auto emission rules.
Like the EU, California regulators believe the cars will be there for their drivers.
“The 2035 deadline applies only to sales of new vehicles. Californians who still have an internal combustion vehicle can keep it for the life of the vehicle,” Dave Clegern, spokesperson for the California Air Resources Board’s climate change programs, told S&P Global in an email. “It is our understanding that there will be adequate vehicles on the market to meet demand.”
Analysis by S&P Global shows shortages before the EU or California reach their first deadlines. In 2026, the world will face an estimated 25,000 mt lithium carbonate deficit and a 15,000 mt cobalt deficit. The copper deficit is expected to reach 116,000 mt by 2026, with the copper price hitting $9,629/mt. Copper in particular will be in shortage for years to come, due to a lack of exploration by miners.
“Copper faces significant supply problems over the next decade; many of the larger deposits have been discovered and are aging,” Burford said. “A wide supply gap is expected in the early 2030s. We could expect to face supply shortages as these policies come into force.”
Recycling battery metals will be key to maintaining supplies, according to Clegern and various analysts.
“For commodities, such as nickel and cobalt, we expect that recycling of EV batteries will play a greater role in meeting the demand requirement,” Angela Durrant, senior research manager at Wood Mackenzie, told S&P Global.
While lithium, cobalt and nickel are expected to be in sufficient supply to respond to demand in the long run, Burford said lithium carbonate equivalent is expected to be in oversupply within about a decade.
“When we consider lithium, for example, refined lithium carbonate equivalent is expected to enter a period of global oversupply in the 2030s, with conversion to lithium hydroxide potentially allowing the demand from cathodes to be met,” he said.
S&P Global reporter Reicelene Joy Go produces content for distribution on Capital IQ Pro.
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