How does the global trade in metals actually work? Where is it going wrong and how can we use this chain to specifically further the energy transition? Industrial ecologist Benjamin Sprecher explains all. ‘New mines are important but there is also a bottleneck in the refining of metals.’
It can be extracted anywhere, from seawater and even granite: lithium. The demand for it is increasing, for batteries in electric cars in particular. If you can get it from anywhere, why then does the vast majority of lithium come from Australia, as a diagram produced by Benjamin Sprecher and colleagues shows?
Sprecher explored the supply chains of metals that are required for the energy transition. ‘Australia has a long and prolific mining history. It is an empty country so there is plenty of space for mining. It also has a well-trained workforce and minimal legislation.’
Because of this, mining companies do not have strict environmental regulations to take into account and can get started relatively cheaply. ‘That has historically allowed the industry to grow and Australia to become so big in lithium extraction.’
The price that people are now prepared to pay for products is only achievable if mining is carried out cheaply. Without high-tech and without treating waste and people properly.’
Race to the bottom
A lot of mining activities have come about in the same way in Africa too. The continent is certainly rich in natural resources. But the fact that there is a large population available who are willing to work for not much pay and that safety and environmental regulations are virtually non-existent has also played a part. ‘This has created a race to the bottom. The price that people are now prepared to pay for products is only achievable if mining is carried out cheaply. Without high-tech and without treating waste and people properly.’
What does that look like? ‘I have just come back from Armenia where I saw huge lakes full of toxic waste from copper mines.’ Sometimes there are terrible disasters. In 2019, the Brazilian village of Brumadinho – along with 272 inhabitants – was washed away by a mudslide caused when the mountain of waste that had built up from the iron mine shifted.
Economy of scale
The largest player in metal extraction is China. The above-mentioned aspects don’t tell the whole story there. ‘Compared to other countries, China has become extremely good at extracting and processing metals. In the 1980s, the government started a lot of metal industry activity under poor working conditions. Since then, working conditions have improved but the economy of scale that was built up back then remains.’
Europe seems to be lagging considerably, while we need a lot more metal for our Green Deal. ‘Apart from lithium, as far as most metals are concerned there is simply not enough available in Europe, although there are still quite a lot of rare earth elements in Sweden.’ Just before the interview, Sprecher read in Het Financieele Dagblad that an old mine near the French village of Échassières may become an important source of lithium, enough to supply batteries for 700,000 cars a year. The local population seems to be in favour of the plans of French mining multinational Imerys.
There is still a long way to go in terms of procedures and preparations and there is also that race to the bottom to contend with. Is it possible to save people and the environment and still compete with existing Australian lithium mines? Sprecher is following the topic with interest. ‘I hope that it is a success, in a social and clean manner and with the European funding that is required. Our own European mining industry is important, both to show that things can be done properly and also to become less sensitive to geopolitical tensions. More mining activity is also essential in order to step up the pace of the energy transition.’
Refining is also lead by China
But we need more than an increase in mining activity and more responsible mining. Sprecher: ‘Refining – the processing of ores and metals via complex chemical processes – is an even bigger problem. Here too, it is China that, through targeted investments, is best placed to produce millions of lithium batteries, for example. We have not invested much in this to date in Europe.'
Sprecher is concerned about the way that discussions regarding the toxic emissions from the Tata Steel steel plant in IJmuiden, for example, are going. ‘Naturally, no-one wants to live next to a plant like that. But we don’t want to be dependent on China either.’
‘New clean technology is ready to go! It will just cost a few billion to get it up and running.'
Is it a question of choosing between two evils? No, there is another way. ‘New clean technology is ready to go! It will just cost a few billion to get it up and running. China would just get on with it but here, the outcome of the discussion might be that the plant disappears and we still become dependent on other countries for steel production.’
Around a billion
Around a billion seemed hardly an issue when support was required on account of the coronavirus in 2020. Or when the government purchased the Fortis and ABN Amro banks for almost 17 billion euros during the financial crisis in 2008. In the past, the purpose of this kind of decisive multi-billion investment was usually to preserve the status quo. Now they have to be made to bring about a change and that seems to be more difficult.
Sprecher hopes that clean steel production by Tata Steel, as well as new mines and refining industry in Europe, will get the billions in government aid that is required to achieve the energy transition. ‘The network of mining companies, trading houses and the London Metal Exchange – which is in fact similar to Aalsmeer flower auction but for global metal trading – now suffers from too many hog price cycles.
'That is what happened with lithium, for example. About ten years ago, market players invested heavily in it, anticipating that demand would rise due to the emerging market for electric cars.’ Demand ended up being disappointing, as a result of which the price plummeted. ‘Now that demand has increased, supply is lagging behind because market players don’t want to get burned again by erratic government policy.'
Europe may require products to be of good quality, production to be environmentally-friendly but also stipulate that materials must come from Europe. Then the industry will make sure that that is what happens.’
Now the power grid is clogged
‘It is really difficult to get all the players lined up in a row so that supply and demand are balanced’, says Sprecher. ‘If one player doesn’t join in, that’s the end of it and others have made investments for nothing. For instance, the Netherlands Authority for Consumers and Markets (ACM, ed.) did not dare expand the power grid capacity. Now, as a result, the grid is clogged due to the growing number of solar panels.’ We need clear industrial policy, concludes Sprecher, in the form of financial support and firm commitments on regulations.
‘Europe may require products to be of good quality, production to be environmentally-friendly but also stipulate that materials must come from Europe. Then the industry will make sure that that is what happens.’ But that will lead to clashing interests, he predicts. Citizens will oppose the arrival of a new mine or plant. ‘Clean technology, good working conditions and the importance of this industry on European soil should still make it possible.
Dr. Benjamin Sprecher is assistant professor at the Industrial Design faculty at TU Delft. His field of expertise is the supply chain for critical metals. The focus of his research in Delft is how quantification of environmental impacts can contribute towards sustainable circular product design.
This interview is part of the Leiden-Delft-Erasmus white paper 'Critical materials, Green Energy and Geopolitics: a Complex Mix'.
Read all interviews from the White Paper in the Knowledge File Critical Materials and the Energy Transition and download the white paper via the attachement below.
