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Mining
One of Australia’s top metals and mining experts says attempts to bypass China in the EV revolution will likely stunt the world’s transition to low carbon transport.
Commbank mining doyen Vivek Dhar told the crowd at the Melbourne EV Show at the Melbourne Convention and Exhibition Centre on Friday Australia also risked losing out to other US friendly jurisdictions when it comes to US Inflation Reduction Act (IRA) support if it couldn’t establish ways to head downstream in battery and battery chemicals processing.
US automakers are keen to bankroll, partner and offtake projects that can help them tap the US$369 billion pool of tax incentives in the Biden Administration’s Act.
But Australia, called the 52nd State of the USA by ‘Mr Lithium’ Joe Lowry in a recent talk in the same city thanks to its abundance of lithium and other critical metals, could face competition from other faster movers in free-trade aligned nations.
“You can see that that downstream processing is still within Australia’s wheelhouse given it’s not as prioritised by the US or even Europe,” Dhar said.
“But we are also competing with other countries that have free trade agreements with the US. So it’s not just Australia has a free kick here.
“For instance, if South Korea does things cheaper than us, why would the US invest here over South Korea? So these are some of the big questions to ask as we move down this transition is what is Australia’s comparative advantage?”
Canberra has shown its willingness to dip its toes in the water when it comes to funding critical minerals projects.
That included a $1.25 billion loan for Iluka Resources (ASX:ILU) to build a 4000tpa rare earths refinery at its Eneabba project near Geraldton, tapping a stockpile of previously worthless monazite waste to process rare earths that count as crucial components of EVs and wind turbines.
That loan was criticised from some quarters of the industry given Iluka, an ASX 100 listed mineral sands miner, was well placed to fund the project off its own balance sheet.
Miners like Mineral Resources (ASX:MIN) boss Chris Ellison, who were disappointed to see the Australian Critical Minerals Strategy earlier this year rolled out without the promise of major new incentives to develop local downstream capacity.
Dhar said Australia needed to think about its aims with potential subsidies, noting how they been used to ensure China became the lowest cost manufacturer in the EV supply chain.
“If I have to leave you with just one story of just how China did it? It was done with subsidies,” he said.
“So from 2009 to now we’re talking nearly US$100 billion in subsidies spent for China to build out its EV supply chain.
“If you look at how they built it out, from lithium in the downstream processing, to CATL and BYD, we’ve effectively seen this whole supply chain aimed to be the lowest cost in the world.
“They are looking to be the lowest cost by a margin and so for us to compete with China on the same level is going to be very, very challenging.
“So my push when I talk about subsidies is that I think subsidies can work. But what is the mandate behind the subsidies? Is Australia going to be the lowest cost producer behind subsidies or not?
“And I think that’s going to be really important when we talk about a critical mineral strategy.”
Dhar says the focus should turn to lowering costs.
Australia is currently paying 2-3 times more than China to build lithium refining capacity, he noted.
We pay 67% more than South Korea and 25-50% more than South America, he notes.
“So this is the challenge for Australia if you want to go downstream, if you want it to be value add, what is our comparative advantage?
“How can we get our costs lower? This is the challenge that faces Australia when we talk about out Critical Minerals Strategy. How do we set ourselves up for the future?”
That is not to say there is not a massive opportunity awaiting us.
There are risks to key battery metals from technological advancements.
After seeing lower quality lithium ion batteries with iron and phosphate cathodes match more energy-dense nickel-cobalt-manganese batteries for market share in recent years, Commbank believes Chinese technological developments around sodium ion batteries could pose a threat.
By 2030, as much as 17% of the battery market could be Na-Ion.
“The question is will China manage to push enough innovation with sodium ion to get it into the driving ranges competitive with the market today?” Dhar said.
“Right now sodium ion can achieve something like 140-150km a charge so it’s got range anxiety. It’s not there yet.
“But this is the evolution and this is a technology that we’re watching very closely.
“And I put a key point here is that if you incentivise China to think about sodium ion because lithium prices are too high, this is very much a risk we need to watch in the next five to 10 years.”
He thinks lithium supply needs to rise to avoid high prices that will encourage substitution.
Lithium demand is forecast to rise 3-3.5 times from current levels by 2030 under a scenario that would see global temperatures kept to a 2.6C rise.
In line with more aggressive policies to cap global warming to 1.8C above pre-industrial levels that would lift to five times, Commbank says.
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