Ottawa’s EV targets out of sync with global metal supply

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Appeared in the Financial Post, November 23, 2023
Ottawa’s EV targets out of sync with global metal supply

As pretty much everyone knows by now, the governments of Canada, the United States and many other countries are mandating a shift in vehicle technology—away from vehicles powered primarily by internal combustion engines, and toward vehicles powered primarily with electricity stored on-board in batteries.

The timelines for the electric vehicle (EV) transition are beyond ambitious. Here in Canada, according to Trudeau government targets, 35 per cent of all new medium- and heavy-duty vehicle sales must be electric vehicles by 2030 and 100 per cent of new medium- and heavy-duty vehicle sales must be electric vehicles by 2040.

But these government EV transition timelines depend on the timelines for producing the metals necessary for the manufacturing of battery electric cars. Current technology EVs use large quantities of lithium, nickel, manganese, cadmium, graphite, zinc and other rare-earth elements in both the batteries and drive systems.

Thus, barring breakthrough developments in battery technology or other exotic technologies (or use of hydrogen as a fuel), this massive and rapid expansion of EV production will require a correspondingly massive and rapid expansion of the mining and refining of metals and rare-earth elements. In a new study published by the Fraser Institute, I gathered some numbers to see what the timeline mismatch looks like.

According to the International Energy Agency, to meet international EV adoption pledges (in Canada, the U.S. and beyond), by 2030 we need 50 new lithium mines, 60 new nickel mines, 17 new cobalt mines, 50 new mines for cathode production, 40 new mines for anode materials, 90 new mines for battery cells and 81 new mines for EV bodies and motors. For a total of 388 new mines worldwide. For context, as of 2021, only 270 metal mines operated in the U.S. and only 70 in Canada. If Canada and the U.S. wish to have domestic supply chains for these vital EV metals, they have a lot of mines to establish in a very short period of time.

Historically, however, mining and refining facilities are slow to develop and plagued by regulatory uncertainty—consider the production timelines for lithium (approximately six to nine years) and nickel (approximately 13 to 18 years). Protesters in Canada and the U.S. will likely slow these timelines, and if mines are declared subject to Canada’s notorious Impact Assessment Act (a.k.a. Bill C-69), timelines for establishing and bringing mines into production may be longer still.

Clearly, aggressive short-term EV adoption goals seem destined to conflict with metal and mineral production, which is historically characterized by long lead times and long production timelines. There’s significant risk that mineral and mining production will fall short of projected demand and this could greatly impact the success of planned EV transitions.

There’s also great potential for market disruption in the metals markets, battery markets and vehicle markets as the supply of metals falls short of demand, conceivably incurring dramatic losses through the entire EV supply chain, all the way through to vehicle dealerships. And of course, as the EV transition targets are political, they’re subject to political forces and whimsy. Investors must be wary of governments abandoning these targets, leaving them holding the bag having built facilities to produce a product that’s unlikely to achieve the projected high sales levels, without government mandates and subsidies.

Canada’s EV transition plans, like all too many plans enacted by the Trudeau government, is unrealistic based on the historical ability of the metals sector to produce new supplies of needed metals. Government would do well to recognize reality, which may interfere with its full-speed-ahead EV mandates, and either stretch them out a goodly distance or scrap them, as it’s truly a bad idea for government to pick winning and losing technologies in a market economy. It almost never ends well.

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