A new study released by McKinsey & Company, Toward security in sustainable battery raw material supply, reveals demand for raw materials used in batteries will outpace supply by 2030.

McKinsey estimates worldwide demand for battery electric vehicles will grow sixfold from 2021 to 2030 and the industry will likely face long-term challenges in keeping up with this demand.

The research says companies that produce and consume battery materials will need to balance the “materials trilemma”: availability, affordability and sustainability.

“The choice of battery chemistry determines the demand for materials,” the report says. Among the two main types of battery chemistries – lithium nickel manganese cobalt oxide and lithium iron phosphate – researchers found there is a growing trend towards lithium iron phosphate batteries.

Battery producers currently consume over 80% of all lithium extracted today. This may rise to 95% by 2030, the report says. Advances in direct lithium extraction technology will bolster the supply of lithium. However, traditional lithium mining will still need to increase substantially to satisfy the demand projected for 2030.

Concerns about a potential nickel shortage have prompted investments in new mines. However, even more supply will be necessary as demand continues to rise, the report says. “The supply of manganese is projected to grow moderately through 2030. However, increasing demand for battery-grade manganese is likely to outpace supply, requiring the development of new refineries. Although manganese ore is plentiful, battery applications require ore conversion into high-purity manganese sulphate monohydrate.”

Another challenge will be complying with environmental, social and governance standards set by governments and customers. “Complete visibility into the origin of raw materials is sometimes unattainable with more than 95% of high-purity manganese produced in China,” the report says. China also refines almost all graphite and is responsible for producing the majority of the world’s anodes. This will not meet the standards of the European Union Batteries Regulation, for example, the report says.

As battery technology is central to decarbonisation efforts, it is vital that the value chain for battery production reduces carbon emissions. “40% of the emissions in the battery supply chain come from upstream raw materials mining and refining processes,” the report says.