The transition to a net-zero economy has created significant demand for lithium-ion batteries, as they currently offer the most cost-effective means of energy storage. Investments to increase capacity across the entire supply chain have been pouring in, resulting in supply outstripping demand by a ratio of three to one in 2023, driven by EVs alone. However, demand is expected to quickly catch up in the coming years if policy pledges are to be met. This means that the EV battery supply chain, which has been centred around China, will be increasingly diversified in the coming years.
Announced global investments by legacy car manufacturers will help reduce the head start that China has had in EV manufacturing. In Canada, manufacturers such as Honda and Volkswagen have announced billions of dollars in investments, joining a growing list of companies looking to diversify the EV battery supply chain. Clustered in the St. Lawrence-Great Lakes region, Canada and the US share a strong cross-border automotive supply chain. With heavily subsidized private investments, the region stands a chance to lead the net-zero transition.
In terms of the specific stages of the EV battery supply chain, the mining of minerals in the upstream stage and their processing in the midstream stage are highly concentrated. However, with expansive mineral deposits of battery-grade minerals used in leading lithium-ion battery chemistries located outside of China, there is considerable scope for diversification. In fact, with reserves of lithium, nickel, cobalt and graphite, Canada has an important role to play in the upstream stage. Canada places first, ahead of China, in BloombergNEF’s annual Global Lithium-Ion Battery Supply Chain Ranking, as its production capacity continues to expand.
The interactive visualization below shows the current state of the EV battery supply chain in Canada and the US, presenting the links of production for the three leading lithium-ion battery chemistries. Please note that the links highlight only production capability and not capacity, which is also of importance. For instance, manganese is mined in very small quantities at two startup facilities in New Brunswick. However, the visualization shows that almost the entire value chain for the leading lithium-ion battery chemistries already exists in Canada and the US.
Parts of the EV battery supply chain in Canada and the US
Taking a closer look at the production capacity for minerals used in NMC batteries in the upstream stage, we can see that, except for nickel and cobalt, the facilities for the other minerals are not yet producing at scale. While the dataset used does not have this information for all facilities, it does include data for operational ones. For startups, it is paramount to quickly scale production to ensure profitability and maintain mineral availability for processors further down the supply chain.
From the available numbers, it is clear that there is a need to accelerate planned investments in lithium and graphite mining, as these minerals are critical even in battery chemistries that avoid the use of manganese and cobalt. In fact, EVs that use the LFP battery chemistry are quickly gaining market share at the expense of NMC and NCA powered EVs, particularly in China.
With extensive experience in cross-border collaboration within the automotive industry in the St. Lawrence-Great Lakes region, it is not surprising to see a strong presence of firms across all stages of the EV battery supply chain. The proximity and interconnectivity between firms from the two countries in different segments of the supply chain open up their market, reducing the risk of their investments by ensuring both upstream and downstream demand, including from EV manufacturing.
The chart below also highlights the relatively lower levels of activity in the upstream mining and processing stages of minerals in the EV battery supply chain. As more of these mines scale production in the coming years, the processing of mineral ore can be expected to be localized. Utilizing the region's railroads and inland waterways for transportation may prove economical.
It is not surprising to see that cell and pack manufacturing have comparatively higher levels of activity, as EV manufacturing is well developed in the US, providing a ready market for these firms. The region's leadership in recycling technologies can also be explained by the lack of mineral production and the challenging economics that new mine operators have to circumnavigate.
The St. Lawrence-Great Lakes region's position in the EV battery supply chain will be further solidified once the projects currently under construction are completed.
Mapping these firms reveals interesting insights into the geography of the industry. Between Canada and the US, mining of mineral ores is clearly concentrated in Canada. Most of Canada's mineral processing facilities are located along the St. Lawrence River and in close proximity to the Great Lakes. In the US, the mineral processing facilities are spread across the southern states.
In fact, most firms across the supply chain are either located in the St. Lawrence-Great Lakes region or in the south, not far from EV manufacturing facilities. The west coast, particularly California, is also home to a significant number of cell and pack manufacturers, as well as recyclers. This concentration may be explained by early moves made by Tesla in the state.
Hover over a firm in the interactive map below to get detailed information on its activities.
As many of these planned investments are scaled and realized in an evolving geopolitical landscape, it is important to balance the economic benefits generated with the associated environmental costs. This is especially true for Canada, where mines often located on Indigenous lands could have detrimental effects on the delicate environment, which is already vulnerable to climate change. Success here would ensure that Canada can compete globally based on lower GHG emissions and other ESG advantages such as clean energy.