The green energy metal faces uncertain future under Trump

The US electric car industry has grown rapidly on the back of President Joe Biden’s Inflation Reduction Act, with the resulting policy providing hundreds of billions of dollars in tax credits and funding for renewable energy, electric battery manufacturing and electric vehicle production and sales.

The US currently uses about 6 per cent of the world’s lithium and is expected to soak up 9 per cent by 2030 according to Morgan Stanley’s modelling.

Trump is expected to revoke consumer incentives of up to $US7500 ($11,300) for electric vehicle purchases, which will make electric cars more expensive to buy and result in fewer sales. He has also loudly proclaimed a return to “drill, baby, drill” fossil fuel energy policies when he is inaugurated this month.

In an extreme scenario, demand growth for batteries in the US electric vehicle market could plunge by as much as 20 per cent, modelling suggests.

“At the end of the day, we will see [electric vehicle] growth continue, it’s just going to be a lot slower,” said Prateek Biswas, a transport and materials analyst at consultancy Wood Mackenzie.

While a second Trump administration will intensify the global challenges of averting catastrophic climate change, it may not all be bad news for Australia.

It’s a big problem for the West, especially the US, that all these critical minerals are now funnelled through China

Ken Brinsden, industry veteran and chief executive of Quebec-based Patriot Battery Metals.

Trump’s promise to rescind “unspent” funds under the Inflation Reduction Act could make the US a less-attractive destination for green energy investment, and increase Australia’s ability to compete for global capital to harness more opportunities in the processing and refining of critical minerals. “If other countries vacate the field, then let’s take the rug from under them that they no longer want,” Climate Change Authority chair Matt Kean said.

Brinsden, whose company late last year inked a crucial supply deal with global car manufacturer Volkswagen and its battery offshoot PowerCo, said China’s dominance of the lithium and critical mineral production is a major headache for the West that will shape US and other nations’ policies.

“Despite what Trump says, I think you’ll find what he does is something completely different. It’s a big problem for the West, especially the US, that all these critical minerals are now funnelled through China,” Brinsden said.

Global miner Rio Tinto is also backing the sector with large investments.

Rio is close to completing a $10.7 billion takeover of Arcadium Lithium. That will give it an immediate production boost in Argentina where Arcadium extracts lithium from groundwater “brines” that lie beneath salt lakes in the Andes mountains.

Rio said in December it will spend $4 billion expanding its Rincon operation, also in Argentina. Chief executive Jakob Stausholm told investors late last year the current down-cycle in lithium played into Rio’s plans.

“If we take a decision to build Rincon for example, that will produce in 2028/29. Actually, the lower the price goes, the more oversupply there is in the years in between, [that] is only good because it means that less will be produced out there [in 2029],” Stausholm said.

Brinsden said, experience suggests the slump won’t last forever. “Typically in the lithium world, it really doesn’t last that long. The cycles have proven to be pretty short historically,” he said.

“While investors are sitting on the sidelines today, I can assure you, they’re watching very closely what’s going on with respect to prices and presumably are ready to pounce,” Brinsden said.

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