Critical Raw Material Supply Risk Analysis
Lithium: The data on lithium mine production comes from the latest five-year USGS report: USGS mcs2017-mcs2022. The reserve data were taken from the newest version, USGS mcs2022. However, to protect the data privacy of the mining companies in the United States, the historical data of lithium mine production in the United States has not been disclosed.
According to the latest USGS data in 2022, the world's lithium reserves are highly concentrated in Chile (41%), Australia (25%), Argentina (10%), and China (7%). The production of lithium ore, with similar reserves, has been concentrated in Australia (in the range of 35%-65%), Chile (15%-35%), Argentina (5%-15%) and China (5%-20%) for the past five years. No other countries or regions have any significant proportion. Details are shown below:
Thanks to the rapid development of electric vehicles, the proportion of lithium used in batteries worldwide have increased yearly, from 39% in 2016 to 71% in 2020, doubling in five years. With the rapid increase in the number of electric vehicles anticipated for the future, it is predicted that the proportion of mined lithium used in batteries will continue to increase, probably exceeding 90%. Therefore, analyzing the overall situation of global lithium resources is roughly equivalent to studying the lithium resources for batteries.
Cobalt
The world's cobalt reserves are highly concentrated in Congo (Kinshasa) (46%), Australia (18%), Indonesia (8%) and Cuba (7%). We can find that Congo (Kinshasa) has an overwhelming advantage in the annual amount of cobalt mine production, accounting for 55%-75%, followed by Australia (less than 5%), Cuba (less than 5%), and China (less than 3%). The global data on the cobalt content of batteries, however, has been unreliable over the years. The information was 51% in 2016 and 57% in 2020. Therefore, it has been inferred that the mined cobalt used in batteries has been between 50% and 60% in recent years. From this, it can be concluded that batteries account for the most significant proportion of mined cobalt resources, and that analyzing global cobalt ore use is equivalent to qualitative research on the worldwide cobalt use in batteries.
Nickel: Compared with the global reserves of lithium and cobalt resources, the global nickel reserves are relatively less concentrated in any single dominant location. Indonesia and Australia are equally divided in the proportion of nickel, and together they have become the most crucial nickel ore suppliers. To sum up, the main distribution of nickel reserves is: Indonesia (22%), Australia (22%), Brazil (17%) and Russia (8%). In terms of global nickel mine production, in the past five years, Australia's primary production share has accounted for 5%-10% globally; Russia’s, 9%-12%; Canada’s, 6%-12%; the Philippines’, 12% -17%; Brazil’s, 2%-8%; China’s, 4%-5%; and New Caledonia’s, 7%-10%.
To sum up, the supply of key mineral resources for power lithium-ion battery materials is highly concentrated in a few individual countries and regions, making access to this supply somewhat fragile; any major disruption could jeopardize the production volume of power lithium-ion batteries. Based on the three essential mineral resources of cobalt, nickel and lithium, the critical core countries are Australia, Congo, Chile and Indonesia.
Dynamic Material Flow Analysis for Global Power Li-Ion Batteries
According to the established material flow model, we used the tool e!Sankey 4 to process the data, we chose the figures in the years 2016, 2018, and 2020 for display, and obtained the results shown below, which are mainly based on the following dynamic material flow diagram:
Single-year analysis of global material flows
As can be seen from the above Figures, the top ten companies in global shipments are, without exception, concentrated in three countries: China, South Korea, and Japan, of which China’s shipments account for the largest share. The installation is less than the shipment shown in the layout because a small part of the power battery flow is an inventory backlog. The number of complete vehicles sold worldwide is less than the number of installations in that year because some of the vehicles are accumulated as inventory.
From the perspective of the global market of power lithium-ion batteries, the Chinese market makes up the largest share, followed by the United States, Europe minus Germany and France, Germany, the United Kingdom, and Japan, and the market share of all the other global regions combined is small. It can be seen that the market concentration of power batteries, from raw material mineral reserves and crude ore production to battery production, on the supply side, to vehicle sales on the demand side, is very high, and that battery production is highly concentrated, in only three countries: China, Japan, and South Korea. The demand side is also mainly concentrated in the primary market countries and regions, and the current share of other countries and areas in the world is tiny, in terms of both production and demand.
Multi-year dynamic material flow analysis
Demand-side analysis: Global sales of new-energy vehicles are expected to reach 10 million units in 2022, and the Chinese market is expected to continue to occupy about half of the global market share due to the driving force of increasing consumption. The US market is expected to gradually increase under its new policy of stimulating the overall growth market(Tencent 2022). The following are the results of our research:
In the global demand for power batteries, China's market share surpassed that of the United States to become the highest in the world in 2016, increasing yearly. In 2015, China accounted for 25.98% of the world's total, slightly lower than the 28.24% of the United States. In 2016, China's share rapidly increased to 48.56%, with a growth rate of 86.92%. In 2017, China's share increased to 59.93%, with a growth rate of 23.43%. In the three years from 2018 to 2020, the market share in China was relatively stable, remaining between 55% and 60%: 60.00% in 2018, 56.35% in 2019, and 57.72% in 2020. The reasons for the rapid growth of the Chinese market can be traced to China's new-energy vehicle pilot subsidy policy, established in 2009, and its new-energy vehicle purchase tax exemption, established in 2012, both of which provided a positive stimulus for the entry of new-energy vehicles in China. As another essential policy milestone, Beijing has restricted the number of vehicles registered per year since 2013, and in 2015 began to introduce traffic control measures to limit the number of ordinary cars. However, since 2017, China's subsidy system has gradually become stricter, reducing the subsidy amount for new-energy vehicles. The policy has imposed severe restrictions on the cruising range and energy consumption standards of the batteries of subsidized vehicles(DieselNet 2022). This has curbed destructive competition to a certain extent and slowed down the growth trend, stabilizing the market share so that it remained between 55% and 60%, from 2018 to 2020.
Owning more than half of the global market share gives China a pivotal role in the power battery market, especially as the market shares of developed countries such as the United States, Japan, Germany, and the United Kingdom have changed little in the last few years. Although the overall number of vehicles in those countries has shown an upward trend, their global market shares have shown a downward trend, year by year, partly because of the rise of the Chinese market and partly because the recent global economic downturn has brought about instability in the new-energy policies in some of those countries, offsetting their growth momentum.
For supply-side analysis: To understand the development of the proportion of leading battery-producing companies, we have summarized and analyzed the cumulative shipments and installation of the world's top three, top five, and top three countries for the past five years. In 2016, the top three battery-producing companies in the world accounted for 44.42% of world production; by 2020, this had risen to 67.91%. In 2016, the total share of the top five companies globally was 56.42%. After a brief decline in 2017, the total percentage of the world's top five companies rose to 80.51% in 2020.
At the national level, in 2016, the top three countries in the world accounted for 71.79% of the total production, and by 2020, the combined proportion of the top three countries had increased to 92.22%. China’s production proportion has been declining year by year. In 2016, the proportion of Chinese enterprises was 49.05%, and by 2020, it had dropped to 37.64%. Furthermore, China's ratio of super enterprises that account for more than 10% of global production has been decreasing yearly. Between 2016 and 2018, the high-production enterprises dropped to two: CATL and BYD. Then, after 2019, BYD's proportion started dropping, eventually falling out of the top 10%, leaving only one enterprise in this category—CATL, leading to China's total share of the production ratio falling significantly.
By contrast, the proportion of South Korean companies has risen rapidly, from 7.58% in 2016 to 37.48% in 2020, globally, similar to the situation of Chinese companies. The rise of South Korea's share is mainly due to the rapid development of the South Korean company LGC in recent years. In 2016, their shipments accounted for 5.26%, and installation for 4.3%. By 2020, shipments had risen to 24.88%, installation capacity to 22.46%, and the other Korean companies, SDI and SKI, have also performed well. The proportion of Japanese companies has remained relatively stable. The only more competitive company has always been Panasonic, which accounted for 15.16% in 2016, increased to about 21% in 2018 and 2019, and dropped to 17.11% in 2020.
Comprehensive Supply and Demand Risk Assessment
Overall, the development trend of the power lithium-ion battery industry in recent years has been excellent. The power lithium-ion battery has shown a rapid growth trend from both the supply and demand sides. However, the new-energy market is still in an immature stage of development. Although the market is growing by leaps and bounds, the current share of new-energy vehicles in the overall vehicle market is not high. In recent years, it has remained in a situation of supply exceeding demand. However, the gap between supply and demand is gradually decreasing. With the significant increase in the market for power batteries and the limitation of the total amount of original resource reserves, it is expected that the power lithium-ion battery industry will shortly be in a short-supply market situation.
The global distribution of the critical raw mineral resources needed for power lithium-ion batteries is as follows: the front-end key raw material lithium is concentrated in Australia and Chile, cobalt is concentrated in the Democratic Republic of the Congo and Australia, and nickel is concentrated in Australia and Indonesia. The countries where power lithium-ion battery manufacturers are also highly concentrated, mainly China, Japan, and South Korea. Since there is no overlap between these two lists, the front-end and back-end supply chain risks are relatively high. Furthermore, the core countries on the consumer side are China, the United States, Europe, etc.
Compared to the above-mentioned key countries and regions, the proportion of other countries and regions is minute and not proportional to the overall economic volumes of countries in the world. For example, India and South Africa among the BRICS countries, and the OECD organization countries such as Canada, Belgium, the Czech Republic, Denmark, and Finland are not included in the list of core countries on either the supply side or the demand side. The most likely reason the market development of power lithium-ion batteries is not distributed proportionally to economic growth is that the electric vehicle industry is still in an early stage of development, and a country’s policies on, and technical levels of, new-energy development significantly affect the demand for power lithium-ion batteries. It is predicted that this situation will change in the next few decades when the electric vehicle market matures and the proportion of electric vehicles in the overall automobile market surpasses that of fossil-fueled vehicles and becomes the primary road vehicle. Then, outside the list, other countries and regions will significantly impact the market supply and demand layout changes. It is also expected that the development pattern of the power lithium-ion battery industry will undergo more remarkable changes in the future.