Irune Echevarria, under the supervision of Professor Sophie Bernard, has carried out a risk analysis of the supply chain of critical minerals for lithium-ion batteries. Read a summary of their work.
As nations globally pivot towards renewable energy, lithium-ion batteries (LIBs) stand at the forefront of this revolution. However, the uneven worldwide distribution of critical minerals essential for LIBs creates a convoluted geopolitical terrain, punctuated by potential supply disruptions, and heightened by environmental and social upheavals. This study aims to refine the GeoPolRisk method, offering insights into securing a stable supply of these vital minerals, focusing particularly on Canada.
This research aimed to enhance the GeoPolRisk method, first introduced by Gemechu et al. (2016), by integrating environmental, social and governance (ESG) considerations, offering a comprehensive tool for evaluating geopolitical risks in critical mineral supply chains. The goal is to provide actionable insights to guide Canada and potentially other nations towards a secure, green future, by highlighting risks to the supply of critical minerals for lithium-ion batteries. Additionally, the study intended to assess market saturation shifts using the Herfindahl-Hirschman Index (HHI) to uncover vulnerabilities in the supply chain’s intermediary stages.
The GeoPolRisk evaluation was conducted through a case study analysis for Canada from 2000-2020 for different critical minerals. While the ESG factors were not significantly impactful, a prominent pattern emerged when applying the HHI approach. Minerals such as cadmium, cobalt, lead, rare earth elements, and magnesium exhibited higher risks primarily due to reliance on one or two predominant producers, influencing the risk factors associated with the share of imports. In contrast, minerals like copper, graphite, iron, lithium, nickel, silver, and zinc showed higher risks mainly driven by modifications of the market saturation (HHI), reflecting a more diverse production mix.
A trend was observed in the approach to assess risk for the two groups of minerals, but production and trade tendencies varied. The case studies of Cobalt and Lithium exemplified these variations. The GeoPolRisk method revealed the importance of evaluating both production concentration and ESG factors for assessing geopolitical risk, while also highlighting the significance of analyzing export saturation index in cases where production mix is diverse. The study emphasized the role of intermediate trade partners in mitigating geopolitical risk, particularly where production is concentrated in few countries, as illustrated by the case of lithium.
This study illuminated the geopolitical risks Canada encounters in the supply chain of critical minerals for lithium-ion batteries. It reveals a significant correlation between ESG factors, political instability, and the limitations of current geopolitical risk assessments. The insights gained opened a new perspective on assessing risks in critical mineral imports, particularly for those used in lithium-ion batteries, highlighting key considerations for Canada.