Energy transition metals: the ESG dilemma

Graphite: hydrofluoric acid means the environmental stakes – and costs – are high

Battery anodes for electric vehicles (EVs) and energy storage systems rely on graphite for more than 90% of their raw materials. With no immediate, widescale alternative, ESG issues have come into sharper focus as consumers question the sustainability of existing supply chains.

Natural graphite, mined mainly in China and, increasingly, Mozambique and Madagascar, is subject to traditional mining ESG concerns, such as water use and equipment and transport emissions. However, battery-grade graphite involves intensive purification and shaping into spherical form, which relies on large quantities of hydrofluoric acid (HF). This downstream process, currently only done in China, has much deeper ESG concerns.

With HF, the environmental stakes are high – and so are the monetary costs. It’s highly corrosive and its disposal is strictly regulated. If corners are cut, the impact can be devastating. 

China is working hard to improve environmental standards in the graphite industry, introducing increasingly strict regulations since the mid-2010s. However, frequent inspections have resulted in ongoing rounds of temporary capacity closures – and some permanent. This has led to supply shortages and price rises. Graphite now appears on many countries’ official lists of critical materials due to concerns over ESG, and China’s control over supply volumes and prices.

Several mine developers outside China are looking to create a new supply chain, with plants being considered in locations around the world. Most are looking to use alternative, low- or zero-HF methodologies, such as acid-alkali or thermal-only. However, the former uses a strong set of environmentally challenging reagents, while the latter entails high energy consumption and production costs. Some companies are exploring other proprietary methods, none of which have yet been proven at scale.

Over the coming decades, a growing proportion of refined lithium production is likely to come from unproven routes. This includes projects aiming to use direct lithium extraction (DLE) technology and extract from unconventional mineral deposits, such as clay, sedimentary or borosilicate minerals.

These routes have potential, but there are engineering challenges. There are no successful commercial-scale lithium production routes using unconventional mineral deposits as feedstock, and limited examples of DLE technology being successfully employed at commercial scale, or achieving the necessary quality of refined lithium.

Watch the webinar replay for a closer look at the future of lithium production. Fill in the form at the top of the page for complimentary access.

Cobalt: ESG adds to the rising cost challenge

The cobalt market is forecast to double in size by 2050, underpinned by a spectrum of battery applications. But a significant supply gap lies ahead, requiring further expansions at existing mining operations and new investment.

There are several sizable obstacles. The cost of mining cobalt is on the rise, due to ore grade attrition and reserve depletion. Surging metal prices and strong EV momentum are triggering a revival of resource nationalism in key producing countries, posing a risk of supply disruption. ESG risk heightens the challenge.

Cobalt reserves and mine production are concentrated in regions and countries that exhibit significant ESG risks. The DRC and Indonesia, by far the top two cobalt reserve holders, are both categorised as high-ESG-risk countries in Verisk Maplecroft’s ESG Risk Index.

In an ‘ESG constrained supply’ scenario, a shortfall in the cobalt market can emerge as early as 2024. Battery recycling, if fully utilised, can ease the upcoming supply shortage, but it cannot fill the entire gap. This implies that virgin cobalt materials will remain critical to meet the surging demand. 

To build up a more resilient supply chain, the industry must take action to address ESG issues through continuous innovation and collaboration. Advanced mining technologies can help improve mining practices, reduce costs and increase traceability of materials. For regions with limited cobalt reserves, such as Europe and North America, or for high-cost producers like Australia, government backing will be crucial to establish localised value chains. Alternative feedstock options must also be explored to mitigate the risk of supply disruption.

Rare earths: a crackdown has seen a fall in illegal and unregulated production – but challenges remain

Growth in rare earth permanent magnet demand is set to increase by 89% by 2030, primarily from automotive and renewable energy applications. China currently dominates the industry and is forecast to account for 63% of total rare earth mine production and 84% of refined output in 2022 – and more than 95% of recycled production. With supply tight, industry and governments in the rest of the world are looking to reduce dependence on China, though commissioning at many projects under development remains unlikely in the short to medium term.

The environmental impact of rare earth mining and processing has been well documented, with production from ionic adsorption clay (IAC)-type deposits a particular issue. Deposits largely occur in remote regions, spread over large areas, making inspection and monitoring challenging. A crackdown by state governments, coupled with falling rare earth prices, did result in a sharp drop in illegal and unregulated production of rare earths from IAC-type deposits in China in 2021. This is progress, but it doesn’t resolve the issue – the crackdown has sparked the development of IAC deposits in Myanmar, and more recently in Laos.

ESG challenges related to IAC-type deposits are a key issue going forward, and innovative solutions must be found. Other methods have been trialled, though have to date proven unsuccessful alternatives to the ammonium-sulphate in-situ leaching widely used in southern China and Myanmar.

The importance of IAC-type deposits is focused on the production of the less abundant heavy rare earth elements. In 2022, such operations will provide 70% of dysprosium oxide mine supply – limited development of IAC-type deposits in the period to 2030, fuelled in good part by ESG concerns, will see this fall to 53%. As a result, other rare earth operations with much lower heavy rare earth contents will have to meet demand growth, particularly for dysprosium and terbium, in permanent magnet applications.

To find out more about the ESG implications of rare earths, along with graphite, cobalt and lithium, fill in the form at the top of the page to access the webinar replay.