Energy markets obsess over critical minerals

One topic dominated conversations during the Axios Pro Climate Deals’ launch week: Where the heck will the minerals and metals needed to build more batteries, solar panels and wind turbines come from?

Why it matters: Demand is soaring, but domestic mining of these materials has lagged and the Russian invasion of Ukraine has upended global markets.

• Wood Mackenzie yesterday warned that the crisis has left an “indelible mark on some commodity markets,” marking the start of a “prolonged shift in some Russian trade from Europe to China and India, and a lack of western participation in the Russian metals and mining sector.”
• Your new dinner-party quip: The energy transition will be from liquids to solids — that is, from oil and gas to metals and minerals.

State of play: About 80% of the world’s raw lithium last year, the core component of lithium-ion batteries, was mined in Australia, Chile and China. The bulk of refining and manufacturing capacity is also based in China.

• After a recent 230% surge, nickel prices in the past 24 hours were seeing 9% swings on the London Metal Exchange, prompting Bloomberg to declare “nickel mayhem.”
• Woodmac’s Robin Griffin: “The price shocks themselves will … engender potentially long-lasting change.”
• The U.S. earlier this year had one operating lithium mine, and one nickel mine set to close in 2025, an industry insider tells Axios.

What they’re saying: “We are already extremely behind. At a fundamental level, these factors have all the makings for a mining renaissance in the USA,” John Dowd, CEO of GoGreen Investments, a SPAC focused on the energy transition that announced a $240 million raise last fall, tells Axios. “The major challenge, though is anti-development policy. If we can’t break the policy logjams, we will not be able to capitalize on this opportunity, and that can impact our economy long term.”Yes, but: The environmental damage from mining is considerable.

• This New York Times report says a single Nevada lithium mining effort will consume billions of gallons of ground water relied on by local cattle ranchers, potentially contaminate the water for hundreds of years, and disturb range and habitat used by pronghorn antelope, sage grouse and golden eagles.

Meanwhile: The folks on team zinc — aka the Zinc Battery Initiative, an effort by the International Zinc Association — say the U.S. already has sufficient mining and refining capacity for what could be a ready alternative to lithium.

• “There is sufficient refining capacity in place to meet current demand with ease. When the battery grade zinc demand will increase, more battery specific refining capacity will have to be added, which can be accomplished with making additional capital available,” ZBI manager Josef Daniel-Ivad tells Axios.
• Then there’s the Canadian-based firm, The Metals Company, initially valued at $2 billion around the time of its SPAC last year, that’s aiming to collect critical minerals, notably nickel, from the seafloor.

Reality check: Whether a battery uses lithium or another critical mineral in its chemistry, it will generally still need nickel in its cathode.

• To put the shift in perspective, an EV uses roughly six times as many critical minerals as a conventional internal combustion vehicle, according to the International Energy Agency.
• A wind farm requires nine times as many critical minerals in its propellers, tower construction and potential battery as a combined-cycle natural gas plant of similar size, the IEA says.

💭 Our thought bubble: There’s going to be plenty of hard thinking — and, for investors, uncomfortable conversations — about where and how we source the material we’ll need to avert the climate crisis.

• Founders and funders, as always, have the choice of largely ignoring these questions or actively engaging — and not just through their government relations departments.

Catch up fast: The terms “critical minerals” and “metals” tend to be used interchangeably. However, critical minerals are different from rare earths, the latter of which are used in solar photovoltaic panels.

Alan Neuhauser co-authors the Axios Pro Climate Deals newsletter. Sign up now.