Electric Car Battery Raw Materials - lithium salt flats bolivia

The batteries needed to propel the coming wave of electronic vehicles require lithium, cobalt, and nickel. As with the supply chain with computer chips that have reduced the production of new automobiles, supply chain issues with electric car battery raw materials have the potential to limit the availability of the batteries needed for these vehicles and cripple production. The central problem for car makers in North America and Europe is that China controls much of the world’s supply of electric car battery raw materials and, even more so, the production of lithium batteries themselves.

The Rush to Secure Essential Minerals

Rare earth elements are essential ingredients for computer chips. Lithium, cobalt, and nickel are necessary for the production of electric vehicles. The rush to secure essential minerals has taken companies to such far flung parts of the globe as Greenland where the ice is melting uncovering a wealth of minerals, a huge brine lake in Bolivia that contains one of the largest sources of lithium in the world, and New Caledonia in the South Pacific where Tesla expects to source its nickel directly from the mine instead of through a middleman. Although China currently leads in raw materials, Australia comes in second.

Lithium Battery Manufacturing Outside of China

Once Western car makers have secured their own sources of lithium, nickel, cobalt and other essential minerals, they need to manufacture batteries, computer chips, and the like in order to make their electric vehicles. Right now China produces 80% of all lithium batteries so that even as Western companies have their own sources of electric car battery raw materials (lithium, nickel, cobalt), they currently send the ore to China where batteries are produced. As part of the recent infrastructure push by the current administration the Department of Energy is looking at how to ramp up US lithium battery production. At the current time the largest US manufacturers of lithium batteries are Tesla, Panasonic, LG Chemical, Duracell, and Samsung. China is the biggest manufacturer, South Korea is second and the USA has moved up to fourth.

Essential Minerals, Batteries, and National Security

We commonly point out the risks posed to US markets by events abroad. Our DRINC acronym for risks only includes one US-based entity, the Democrats. Otherwise, we commonly watch what is going on with Russia, Iran, North Korea, and China. China it at a tipping point in terms of its power in relation to the rest of the world and its leader may decide to exert that power now to gain control of Taiwan and all of the South China Sea. It has built up its military in terms of manpower but more importantly in terms of advanced weapons systems. The clock is ticking for China as its population ages, a result of the one-couple-one-child policy in effect for decades. China has a huge debt burden reminiscent of Japan in its heyday before the country that seemed destined to take over the world fell into a thirty-year slump of deflation. None of this has gone unnoticed by US military and strategic planners. At long last their voices have been head and the US is viewing China’s dominance of things like lithium battery materials and manufacturing as a strategic threat. That is part of why Biden’s infrastructure bill passed with Republicans on board. The bottom line of all of this for investors and options traders is that one can expect a wave of investment as the US firms up its supply chains for things like electric car battery raw materials and manufacturing to have capacity in North America and among allied nations to produce the things necessary for national defense as well as economic dominance.