BNEF: producing battery materials in the DRC could lower supply-chain emissions and add value to the country’s cobalt
The Democratic Republic of the Congo (DRC) can leverage its abundant cobalt resources and hydroelectric power to become a low-cost and low-emissions producer of lithium-ion battery cathode precursor materials, according to a new study on a unified African supply chain by BloombergNEF (BNEF).
The BNEF study—undertaken at the behest of UN Economic Commission for Africa (ECA), Afreximbank, the African Development Bank (AfDB), the Africa Finance Corporation (AFC), the Arab Bank for Economic Development in Africa (BADEA), the African Legal Support Facility (ALSF), and the UN Global Compact—estimates that it would cost $39 million to build a 10,000 metric-ton cathode precursor plant in the DRC. This is three times cheaper than what a similar plant in the US would cost.
Capital cost to build a 10k metric-ton battery precursor plant. Source: BNEF
A similar plant in China and Poland would cost an estimated $112 million and $65 million, respectively. Precursor material produced at plants in the DRC could be cost competitive with material produced in China and Poland but with a lower environmental footprint.
Emissions associated with battery production could be cut by 30% compared with the existing supply chain that runs through China, if cathode precursor materials (the intermediate material between raw and finished cathode material) were produced in the DRC, with Poland handling the production of cathode materials and cells, and Germany the final pack assembly, according to the study. This is due to the DRC’s proximity to cathode raw materials and heavy reliance on hydroelectric power plants.
The DRC’s cost competitiveness comes from its relatively cheap access to land and low engineering, procurement and construction, or EPC, cost compared to the US, Poland and China. European cell manufacturers currently rely heavily on China for battery precursors. However, the raw materials for batteries are, in most cases, imported into China from Africa and refined before being exported to Europe. Automakers in Europe can lower their emissions by shortening the transport distance and capitalizing on the DRC’s hydroelectric powered grid and proximity to raw materials.—Kwasi Ampofo, lead author of the report and BNEF’s head of metals and mining
Electric vehicles represent a $7 trillion market opportunity between today and 2030, and $46 trillion between today and 2050, according to the new report, “The Cost of Producing Battery Precursors in the DRC”, launched at the DRC-Africa Business Forum 2021.
While there are notable leading electric-vehicle and cell manufacturers today, the sheer scale of growth expected in the coming decades means that there is inherent uncertainty over which companies and countries may come to dominate this new value chain. African countries could play a major role in the lithium-ion battery supply chain by taking advantage of their abundant natural resources and onshoring more of the value chain, the study suggests.
For regions to successfully attract battery component or cell manufacturing they need to have either a supply of key raw materials or local demand for batteries. If they have access to raw materials, they can use this supply to attract downstream manufacturers. If they have local demand for batteries cell manufacturers will move to the region to be close to their customers, particularly in the automotive industry. Africa has a wealth of critical battery raw materials and is in a position to use these to attract more value-add in downstream processing and manufacturing.—James Frith, head of energy storage at BNEF
The African Continental Free Trade Area (AfCFTA) is a free-trade area covering 54 African Union nations, which came into force on 30 May 2019 and effectively went operational on 1 January 2021. The AfCFTA agreement has the potential to create the largest free-trade area in the world. If approached correctly, African countries can capitalize on their abundant natural resources, growing demand for vehicles and rapid urbanization to build a global hub to produce electric vehicles.
We are only at the beginning of the path to achieving net-zero emissions globally. Emerging economies in Africa can gain significant long-term economic value by quickly setting up projects that support the low-carbon transition with transparent governance frameworks.—Ashish Sethia, global head of commodities at BNEF
The Africa Continental Free Trade Area, the largest trading bloc globally, provides a compelling case for the Democratic Republic of Congo to leverage its and Africa’s abundant mineral and clean energy resources to become a growth pole of the global clean energy transition and inclusive resilient development that leaves no one behind.
The DRC produces about 70% of global cobalt but captures just 3% of the battery and electric vehicle value chain. With a functioning AfCFTA, the DRC can receive other upstream mineral inputs needed for lithium-ion batteries—such as manganese from, say, South Africa and Madagascar, copper from Zambia, graphite from Mozambique and Tanzania, phosphate from Morocco, and lithium from Zimbabwe, to name but a few.
The DRC can truly become the regional and global center of gravity for the production of precursor materials for batteries to drive the fourth industrial revolution. In so doing, the country and the rest of Africa can extend their access from the US$271-billion battery precursor segment to the more lucrative US$1.4-trillion combined battery cell production and cell assembly segments of the battery minerals global value chain.
This requires plenty of reliable and affordable power, which can be achieved by connecting Africa’s power systems with the Grand Inga at the core and with wind and solar power from North African countries, the Sahel and South Africa, geothermal from East Africa, hydro from Central and West Africa. But, to reap these benefits, African leaders must make the commitment to facilitate the needed investments and make the AfCFTA deliver for the continent.—Vera Songwe, UN Under-Secretary General and Executive Secretary of the United Nations Economic Commission for Africa (ECA)
The BloombergNEF report reinforces what we have consistently advocated. Africa’s mineral resources must be utilized for the development of the continent. That requires a radical change from dependency on the export of raw commodities, with very little or no value addition. Manufacturing battery precursors will add value to our mineral resources, grow renewable energy technologies, accelerate industrialization, light up and power Africa and create jobs for millions of young Africans.—African Development Bank President Dr. Akinwumi A. Adesina