U.S. Far From Domestic Supply Chain for EVs

You’ve got to hand it to China. Over a decade ago it figured out the automotive industry would transition to electric vehicles.

And so, it set out to dominate the raw-materials supply chain needed to make EVs. That strategy paid off brilliantly: China now dominates 80% or more of the processing and refining for nickel, cobalt, lithium, manganese and rare earth minerals – the very materials needed to make electric motors and batteries.

Today, the U.S., EU, Australia and Japan regret how dependent they’ve become on China. They want to develop their own supply chains and, while it can be done, it won’t be easy and will take years to develop even with generous government subsidies. Nonetheless, the pressure is on to do it.

You would hope we could all learn to get along and trade freely, but everyone remembers what happened in 2010 between China and Japan.

The two of them have been arguing for decades over who owns a speck of uninhabited islands (called Senkaku in Japan, Diaoyu in China) in the South China Sea, currently occupied by Japan.

So, when a Chinese trawler started fishing in those waters and collided with Japanese coast guard frigates, Japan took the ship’s captain into custody. China was furious and one way it retaliated was by stopping shipments of rare earths to Japan. Everyone worries something like that could happen again.

That dispute was later resolved, but Japan plunged ahead to develop its own supply chain. In 2018 it discovered large deposits of rare earths in the waters within Japan’s exclusive economic zone.

There’s enough rare earths there to make EVs for hundreds of years. Yet Japan still relies on China for over half of its supply, and that is a wake-up call for those countries that want to develop their own domestic supply chains. It takes years to do it.

The challenge is not just with getting these raw materials; it’s with refining and processing them into metals and alloys. That’s where China’s strategy has been most effective. The world’s largest rare earth mine is actually in California, yet 100% of its output is shipped to China to get refined. The U.S. has zero capacity to do it.

A key reason why the rest of the world relinquished refining to China is that it can be an environmental nightmare. It creates an enormous amount of waste. For example, the hard rock that contains lithium only contains 3% lithium. That means 97% of the rock that gets mined gets dumped.

To put that in perspective, all the municipalities in the world generate 2 billion tons of waste a year. That sounds like a lot but the mining industry generates 190 billion tons of waste every year. All that processing requires massive amounts of energy, which generates huge amounts of greenhouse gasses.

There are alternatives. General Motors announced it’s working with a company called Controlled Thermal Resources to extract lithium brine from the Salton Sea in California.

They will use a closed-loop process that will leave no tailings, which is the name for the useless stuff that gets dumped. This process will have a much smaller footprint, use far less water and emit less CO2 compared to other lithium mining methods.

Tesla filed a patent to extract lithium from clay. It also secured the rights to 10,000 acres (4,050 ha) in Nevada with the proper clay deposits. Tesla’s process uses salt and water to leach the lithium out of the clay. And Tesla says the leftover clay would be put right back in the ground.

The most intriguing alternative comes from The Metals Company, a British startup that believes it can supply all the copper, nickel, cobalt and manganese the world needs. It all comes from what are called polymetallic nodules that sit on the ocean floor.

Each nodule, or rock, is made out of those four metals. All you have to do is go pick them up. But it’s not as easy as it sounds.

The best source of these polymetallic nodules is 4,000 meters deep, or more than 12,000 feet. They’re in a part of the Pacific that lies between the U.S. mainland and Hawaii but is in international waters. The Metals Company says it’s developed the technique to recover them, and one of the first places it wants to refine them is in Texas City – right next to Galveston.

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But back then there were no international treaties to regulate mining in international waters, so nothing happened. Today the regulations are in place, which is why The Metals Company wants to start mining in 2024. It’s not alone. Chinese companies are very much aware of these polymetallic nodules and are getting applications to mine them as well.

There are national-security and environmental reasons for the U.S. and others to develop their own supply chains for raw materials. But it’s going to take detailed planning, generous subsidies and a determined effort to see it through. Hopefully, these efforts will not get debated to death. As the saying goes, there’s no better time to get started than the present.

John McElroy (pictured above, left) is editorial director of Blue Sky Productions and producer of “Autoline Detroit” for WTVS-Channel 56, Detroit.