Super Wood Could Replace Steel
    The paradox of energy

    KOLWEZI, Democratic Republic of Congo—Miners push bicycles piled high with bags of a grayish-blue ore along a dusty road to a makeshift market. There, they line up at wholesalers with nicknames such as Crazy Jack and Boss Lee.

    Most of the buyers are Chinese. Those buyers then sell to Chinese companies that ship the bags, filled with cobalt, to China for processing into rechargeable, lithium-ion batteries that power laptops and smartphones and electric cars.

    There is a world-wide race to lock up the supply chain for cobalt, which will likely be in even greater demand as electric-car production rises. So far, China is way ahead.

    Chinese imports of cobalt from Congo, the world’s biggest producer of cobalt, totaled $1.2 billion in the first nine months of 2017, compared with just $3.2 million by India, the second-largest importer, government data show.

    “We’re realizing that the Congo is to [electric vehicles] what Saudi Arabia is to the internal combustion engine,” says Trent Mell, chief executive of exploration company First CobaltCorp. , based in Toronto. Chinese firms are keenly aware of Congo’s importance to electric vehicles, he says, and “trying to control the whole ecosystem…from cobalt mining to battery production.”

    Lithium-ion battery production is concentrated in four countries. Much of Congo’s cobalt winds up in processed cobalt sulfate. Congo produces more than half of the global supply of cobalt. Percentage of raw cobalt production, by country

    Germany 9%, China 6%, U.S. 14% Other 20%, Congo 54%

    Processed Cobalt

    China 80%, Other 14%, Sweden 9%

    Sources: U.S. Geological Survey (cobalt production); Benchmark Mineral Intelligence (cobalt sulfate, production forecast)

    Electric Car market

    China already is the world’s largest electric-car market. In 2011, Beijing listed electric vehicles as one of seven “strategic emerging industries.” Developing a homegrown battery industry became a vital part of the government-sponsored push. The Chinese government provides subsidies to domestic battery makers, essentially locking out foreign companies.

    Companies from China now dominate the first steps in the lithium-ion battery production process. Such firms produce about 77% of refined cobalt chemicals, up from 67% in 2012, according to commodities researcher CRU Group . George Heppel, a consultant at CRU, says Chinese companies could soon have more than 90% of the market.


    Contemporary Amperex Technology Co., based in China's coastal Fujian province, is one of the country\'s largest makers of electric-vehicle batteries.
    Contemporary Amperex Technology Co., based in China’s coastal Fujian province, is one of the country\’s largest makers of electric-vehicle batteries. PHOTO: QILAI SHEN/BLOOMBERG NEWS

    It’s very clear that the Chinese want to be at the center of electric vehicles. There’s no question there’s a laserlike focus,” says Anthony Milewski, chief executive of Cobalt 27 Capital Corp. , which is based in Toronto and owns about 3,000 tons of cobalt, one of the world’s largest stockpiles.

    The shift to electric vehicles is happening faster than many experts anticipated just a few years ago, due in part to the rapid evolution of a global supply chain for key components in lithium-ion batteries. That has driven down prices and helped battery makers scale up production.

    Battery production

    Battery production and the supply chain behind it remains fragmented, though, complicating efforts by auto makers to ensure supplies. One company mines the minerals, another refines it, a third makes the cells, a fourth combines the cells into a battery module, and a fifth buys the modules to assemble into a battery. Chinese companies are making major investments in each link of the supply chain.

    Global battery manufacturing capacity is about 110 gigawatt hours a year, mostly for consumer electronics, electric vehicles and electricity storage. In the past year, China has announced plans to add more than 150 gigawatt hours of production in the next three to four years, tripling current capacity. That dwarfs Tesla’s “gigafactory” in the Nevada desert, which aims to add 35 gigawatt hours by 2020.

    “The Chinese manufacturers have targets set by the government,” says Luis Munuera, an analyst with the International Energy Agency. “It is not a market response. It is the amount of battery capacity the government wants to have.”

    After the Chinese government helped engineer a big export market in the solar industry, the cost of a residential rooftop solar array has fallen to $16,000 from $41,000 in 2010, according to the National Renewable Energy Laboratory. A large, 100-megawatt solar installation that cost $544 million to build in 2010 can now be built for $111 million.

    About 65% of all solar modules are made in China, and seven of the top 10 module manufacturers are Chinese.


    Super Wood Could Replace Steel
    The paradox of energy
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