Critical minerals – The race at the heart of battery storage

But current data lays bare the extent of the industry concentration. According to the IEA, over half of global raw material processing for lithium, cobalt and natural graphite occurs in China; indeed, with 90% of graphite mining occurring within its borders, China dominates the graphite anode supply chain. China also possesses 85% of global battery cell manufacturing capacity and accounts for 90% of cathode and 98% of anode active material global manufacturing. The numbers dwarf Europe's share, which stands at 7% of battery cell manufacturing capacity, largely in Poland and Hungary, and 10% of cobalt processing, which mostly takes place in Finland. Crucially, China has also established an expertise ecosystem, meaning some countries rich in natural resources still need to ship those commodities to China for processing.

"China shaped its industrial policy almost 20 years ago in order to own this critical supply chain," notes Calvin Ho, an energy partner in Herbert Smith Freehills' (HSF) Beijing office. "This included tax breaks to encourage capital to move into this area. In the early days, a lot of companies went under in that smaller, emerging market, but now that strategy has paid off."

Other countries have not been idle. Australia's Critical Minerals Strategy builds on the country's favourable geology, which makes it the world's largest producer of raw lithium products such as spodumene. Australia's National Battery Strategy, announced this year, includes A$523.2 million to strengthen economic resilience and battery manufacturing, plus another A$7 billion in support for Australian critical minerals processing over the next decade. The argument goes that access to such raw materials is paramount, as refining capacity can come later while partnerships with like-minded countries can diversify the supply chain – something the EU has sought with its own Critical Raw Minerals Act. The EU act also includes a series of targets, including ensuring that 10% of the EU's annual critical minerals consumption is extracted within the bloc and 40% is refined within its borders, reflecting a wider global drive to bring extraction and processing closer to home.

"Without that raw material you can't produce anything else," says Jay Leary, Perth-based energy, resources and infrastructure partner and head of mining at Herbert Smith Freehills. "The real concern of vehicle manufacturers, for example, is getting access to the raw product – spodumene or lithium brine. If you don't have access to that then your supply chain is very uncertain. Most lithium projects will start as a lithium mine and in the future, once they've developed revenue, look to develop a processing plant." Leary notes the development of Australia and Chile as leading global producers of raw lithium products, alongside rapid growth in Canada, and forecasts that Europe will be a significant lithium producer within 10 years.

Meanwhile, investments from EV manufacturers are forecast to have a relatively even geographic distribution, according to market intelligence provider Atlas Public Policy, which puts the total committed investment by automakers and battery manufacturers at $1.2 trillion. Of this, the US is set to receive $312 billion, Europe $346 billion and China $243 billion.

Game-changers – What are the alternatives to lithium-ion batteries?

Some emerging trends may also begin to distribute battery production more globally, in particular the development of alternate battery chemicals, such as sodium-ion units. Sodium is one of the most common elements on earth and, unlike lithium-based counterparts, can use aluminium anode current collectors, reducing the need for copper, cobalt and nickel. While China has also taken a lead in sodium-ion battery development, a more readily obtainable chemistry means other economies would have an easier time catching up, making their lower energy density potentially a reasonable trade-off. Commercially viable solid-state batteries – a safer and potentially more powerful model – could similarly prove a game-changer. Meanwhile, with planning in Europe for around 30 gigafactories – a loose term for large manufacturing hubs that make battery units or related decarbonisation technologies – the region is becoming one of the fastest growing in the world for the manufacturing of EV batteries outside of China. Japan and South Korea are also regarded as key emerging manufacturing hubs.

Of course, introducing new battery models into a large and expanding markets create challenges. For carmakers, who are committed to multi-year production lines, a shift towards sodium-ion or solid-state batteries could prove disruptive. Meanwhile, original equipment manufacturers (OEM) are central to the dilemma, both spearheading research and development and assessing the risks posed by widespread new battery units to long-term investment and procurement strategies.