Taking the assault out of the battery

The traceability of raw materials used in the production of lithium-ion batteries, such as lithium and cobalt, is one of the main sustainability challenges faced by carmakers who are investing to meet the consumer demand and regulatory pressures behind the electric vehicle revolution

Electric car ownership is accelerating fast. Volkswagen Group (VW Group) and Volvo have recently unveiled the first pure-electric ID.3 and XC40 Recharge SUV respectively, and the International Energy Agency (IEA) predicts there will be 125m electric vehicles (EVs) in use worldwide by 2030. This could potentially double if governments step up the pace of legislative change.

Driven by this boom, global battery demand is estimated to increase – analyst firm Wood Mackenzie expects double-digit growth for battery raw materials over the next decade.

However, according to Wolfgang Lehmacher, an independent supply chain and technology strategist, supply shortages will hinder there being enough EVs on the road by 2040 to replace cars driven by the traditional internal combustion engine (ICE), which will be banned in Europe by then, according to current targets. Lehmacher indicates that the sector could face a supply crunch by the mid-2020s.

Wolfgang Lehmacher, supply chain and technology strategist

“Simply put, there are limited amounts of lithium, cobalt, and nickel on earth, so there may just not be enough to meet carmakers future demand,” he says. “Getting the quantity of nickel that electric vehicles will need by the mid-2020s will be a challenge, however the global supply for graphite and manganese, [two other metals required for electric vehicle batteries], is expected to suffice.”

Conflict managementTraceability of raw materials used in the production of lithium-ion batteries, such as cobalt, is one of the main sustainability challenges faced by carmakers. In 2017, the top five countries mining lithium were Australia, Chile, Argentina, China and Zimbabwe. Almost three-quarters of the world’s lithium raw materials come from mines in Australia and Chile. 

Approximately two-thirds of the world’s cobalt is mined in the Democratic Republic of Congo (DRC), which also has a significant role in mining copper, as well as tin, tantalum, tungsten and gold – the so-called 3TG or conflict minerals.

Engine manufacturer and distributor Cummins requires its suppliers to provide information on conflict minerals and to conform with the Responsible Sourcing Initiative (RSI) annually.

“We comply with conflict minerals policy, Section 1502 of the Dodd-Frank Act,” says Katie Zarich, Cummins’ external communication manager. The Dodd-Frank Wall Street Reform and Consumer Protection Act requires public companies to annually disclose information to the US Securities and Exchange Commission about their use of certain minerals originating from a conflict region.

“We adhere to all state and federal regulations with regard to shipping and storage of our materials,” continues Zarich. “All employees that are involved in the process of preparing, sending and handling lithium batteries are trained and certified to ship lithium-ion technology. To ensure compliance with sourcing requirements and adequate capacity to meet our demand, we have visibility into the sourcing of raw materials components beyond our direct supplier.”

Lehmacher believes traceability of the cobalt from the moment of extraction along the different stages in the supply chain is crucial, but says most schemes are failing to do this today. The exception, he says, is probably when using Certified Trading Chains (CTC), which require detailed proof of origin, as well as third party mining site audits and certifications. The CTC was developed by the German Federal Institute for Geosciences and Natural Resource (BGR).

Supply and demandLehmacher points out that lithium is not currently traded on any exchange, with prices being determined by long-term contracts or spot market prices in China. “Securing the supply of raw materials for electric vehicle batteries is a key business requirement and ensuring long-term supply will strengthen companies’ ability to meet demand from electric vehicles manufacturers,” he says.

Some EV and battery manufacturers have managed to secure long-term supply contracts for lithium and cobalt. In May this year VW Group and Ganfeng Lithium signed a memorandum of understanding (MoU) on long-term lithium supplies for battery cells. Under the agreement, Ganfeng will supply lithium to the VW Group and its suppliers for the next ten years.

Carmaker Tesla is the number one battery manufacturer in North America. Its gigafactory in Nevada, a joint venture with Panasonic, is the world’s largest lithium-ion manufacturing factory and it is now working with potential future producers in Canada and the US to create its own cobalt supply chains. 

“Companies that buy batteries or battery components are several steps away from the source of the battery raw materials,” says Lehmacher. “Procuring directly from the mines increases visibility and ensures that they know their cobalt isn’t sourced from illegal mining operations and those using child labour.”

Human cost

Amnesty International says human rights abuse, including the use of child labour in the extraction of minerals used to make EV batteries, is undermining ethical claims regarding energy consumption and emissions.

Kumi Naidoo, Amnesty’s secretary general, told the Nordic EV Summit in Oslo in March this year that climate change should not be dealt with at the expense of human rights. “Without radical changes, the batteries which power green vehicles will continue to be tainted by human rights abuses,” he said. “We need to change course now, or those least responsible for climate change – indigenous communities and children – will pay the price for the shift away from fossil fuels.”

Referring to the human cost, Lehmacher suggests: “Car manufacturers face the dilemma between consumer demand for ethical souring and the need to secure enough minerals to deliver on their electrification commitments.”

Handle with care

Moving batteries to the assembly lines, including their storage requires special handling because of their hazardous nature.

According to Lehmacher, considerations upstream and downstream the supply chain are reflected in frameworks from the CTC and the Organisation for Economic Co-operation and Development (OECD), whose due diligence guide provides recommendations to help companies respect human rights and avoid contributing to conflict through their mineral purchasing decisions and practices.

Lehmacher also points out that there is the need to look at the entire use cycle of batteries. “Battery waste was expected to reach as much as 170,000 tonnes in 2018,” he says. “Lots of energy is needed to extract the minerals from the ground. In the interest of the planet we should re-use and recycle.”

Recycling of batteries is expected to become big business, much as metal recycling is a huge industry today.

“I am convinced that electric vehicle batteries can come close to achieving a circular production cycle that requires a minimum of new material to be injected to make new batteries,” says Lehmacher.

Cummins has announced an extended partnership with the University of California San Diego to analyse the most effective ways of reusing and repurposing electric vehicle batteries. In certain countries, including the UK, the company is obliged to take back, free of charge, waste industrial batteries supplied to an end user for treatment and recycling.

Current investmentDespite the charge against EV batteries, Naga Karthik Voruganti, mobility analyst at Frost Mackenzie is optimistic raw materials can meet the demand of the 2040 emissions target: “We expect EVs to account for most of the demand for raw materials among all the other industries. Lithium, cobalt and nickel companies are increasing their mining activity and have extreme production targets to meet the demand from battery manufacturers globally,” he says.

Voruganti went on to say that those battery manufacturers had, in turn, to keep the supply going to the automakers, who have announced huge EV sales targets to comply with the emission regulations and other related standards across the world.

“With billions of dollars, maybe trillions by the middle of next decade, pouring into this industry, we can definitely expect raw materials to meet the demand of EV production to 2040, he says.”

Cummin’s Zarich adds: “We expect that there will be continued evolution of technology to ensure adequate solutions to meet the requirements of the EV industry.”

Batteries and blockchain

Technologies such as blockchain are expected to replace traditional paper-based labelling methods to demonstrate origin-of-battery materials. Blockchain is the record-keeping technology or ‘distributed ledger’ of digital blocks of information originally developed for Bitcoin. 

Hermes Investment Management recently called for carmakers to adopt distributed ledger technology to prove from where the cobalt in EV batteries comes.

Volvo Cars says it will become the first carmaker to implement global traceability of cobalt used in its batteries by applying blockchain technology. The announcement follows the revelation last month of the company’s first fully electric car, the XC40 Recharge.

It has now reached an agreement with its two global battery suppliers, CATL of China and LG Chem of South Korea, along with leading global blockchain technology firms, to implement traceability of cobalt, starting this year.

“Blockchain, in conjunction with inspection on mine sites, GPS tracking, entry and exit scanning, verified logistics providers, facial recognition, ID checks, and time tracking, all contribute to a material’s traceability from a mine to the car factory,” a company spokesperson for Volvo told Automotive Logistics.

“Volvo Cars is committed to full traceability, ensuring that customers can drive electrified Volvos knowing the material for the batteries has been sourced responsibly,” they continued. “The introduction of blockchain technology significantly boosts traceability within our cobalt supply chain.”

Martina Buchhauser, head of procurement at Volvo Cars adds: “With blockchain technology, we can take the next step towards ensuring full traceability of our supply chain and minimising any related risks, in close collaboration with our suppliers.”

 The Volvo XC40 Recharge battery package

IBM, in collaboration among Ford, LG Chem, Huayou Cobalt and RCS Global, launched a blockchain pilot at the beginning of this year to trace and validate sourced cobalt, from mine to end-user. It traced the material from a mine in the DRC, refining and upgrading in Asia, and to an end user in the US and Europe.

“Cobalt produced at the Huayou Cobalt’s industrial mine in the DRC will be monitored as it travels from mine and smelter to LG Chem’s cathode plant and battery plant in South Korea, and into a Ford factory,” explains Lehmacher.

“Each actor along the chain will be validated using OECD sourcing standards to confirm that each participant meets the obligations outlined by the international governing body,” he said. “The audit trail on the blockchain is linked to “immutable” records with full details of the production characteristics of the cobalt in question at each stage of the supply chain.”

Blockchain technology, which establishes a transparent and reliable shared data network, significantly boosts transparency of the raw material supply chain because the information about the material’s origin cannot be changed undetected, says Lemacher. However, he does point out that it does not replace human-led auditing or due diligence.

“Going to mine sites, refineries and downstream manufacturing entities to assess management systems and operations will still be needed to validate the true origin and responsible practices. But the complete and consistent data gathered during the assessments will enable end-to-end traceability as the basis for the required transparency.”

Seven mining and metals companies teamed up with the world economic forum (WEF) in October, to improve responsible sourcing of raw materials. Geneva-based WEF stated that the new Mining and Metals Blockchain Initiative will explore the building of a blockchain platform to address transparency, the track and tracing of materials and the reporting of carbon emissions. 

The seven founding members were: Antofagasta Minerals, Eurasian Resources Group Sàrl, Glencore, Klöckner & Co, Minsur SA, Tata Steel Limited, Anglo American/De Beers (Tracr).

Those members aim to be an impartial body for the industry, addressing the lack of standardisation and efficiency improvement potential. The group will look to develop joint proof of concepts for an inclusive blockchain platform.

Lehmacher concludes: “Over time, this could help the industry to collectively increase the level of transparency, efficiency or improve reporting of carbon emissions.”