This Winter/Spring, I had the great opportunity to participate as a client in a Capstone project of the Munk School of Public Policy and Global Affairs at the University of Toronto. A group of great grad students worked to help me get smarter on critical minerals supply chains, their use in battery technologies, the countries that currently dominate reserves, development and production – all critical parts of energy security. At my request they focused on the opportunities in Canada, where the government last fall introduced a critical mineral strategy, which followed the significant EV supply chain incentives in the US Inflation Reduction Act. The students and I, who will no doubt go on to great contributions in the policy and investment worlds, are delighted to share the (or flip through it below) so that it may inform debate and decision making for those interested in critical minerals in Canada and other jurisdictions. You can view or download the deck below or at this link.
The report surveys five of the minerals that are currently the most used in battery technologies and which have deposits in Canada, details into how they are and may be used (for batteries and other supply chains), which countries and entities dominate the mining and what projects if any are being considered in Canada. It thus is a useful way to get up to speed on many aspects of these supply chains, globally not just in Canada. The work suggests that new mining projects, especially those with stronger environmental protections (since those are the ones likely to be approved) are most attractive segment of the supply chain for Canada, despite some smaller pilot projects on processing. The Canadian government and provincial governments are also investing a lot in incentives for battery production to avoid losing automotive supply chains to the US.
The research suggests that the largest opportunity in Canada resides in nickel including potential Class 1, high-ESG operations on the West Coast. As with fossil fuel energy projects, Canada does have an opportunity to demand higher environmental and labor standards than some emerging economy peers, but there continue to be some questions about the cost of these projects, which should be reviewed.
This report does not aim to be the end-all in assessing opportunities, both because this is a moving target as innovation continues to drive new battery technologies and government and private investment (and restrictions) will reshape supply chains, but it hopefully lays out some of the key questions. These include the increased competition for minerals, capital and technology transfer for processing which many producers including those in Latin America and Asia (Indonesia) are demanding.
Belatedly, policymakers and national security experts are focusing on critical minerals, especially those used in electric vehicle and other high-capacity battery supply chains. The interest reflects two linked trends – the assumed demand for these minerals over the coming years if we are to come close to meeting electrification goals, and concerns by many developed economies, especially the U.S. around Chinese dominance of these supply chains. While the raw materials are found in a range of countries, China accounts for the overwhelming majority of processing and concentration of these metals, making it very difficult to reduce reliance. Many countries especially the US are allocating significant funds to try to change this. The IRA in particular set off significant response in many developed economies.
The uses for these commodities is changing rapidly – notice the recent announcements around sodium-based batteries, which could be a real game changer and change the map of resource dependency. Corporate innovation and funding of basic research is key. At the same time, the policy environment too is moving fast, with not only incentives in the IRA (which focus on the end produced electric vehicles) and other incentives and subsidies in Canada’s recent budget, new rules on state aid and critical minerals from the EU, Japan and many others. At a first glance these raise many questions about how realistic the targets are. At the same time, the fear of being locked out from the US automotive market has prompted a flurry of countries seeking to sign narrow “trade” deals to potentially access these incentives. This comes at a time, when traditional trade agreements between the US and trading partners are on ice and standards based agreements focused on boosting labor and environmental standards are what is on offer. As many smart analysts have noted, in order to make even some of the targets, the US existing friends such as Canada will need to move more quickly and the US will need new friends such as Indonesia and Argentina. It remains to be seen how these countries will navigate the US demands to reduce reliance on Chinese supply chains.
Ziemba Insights 