13 June 2024

North America’s EV plans will not be successful without Quebec

SFA (Oxford) views Quebec as a critical player in building the North American supply chain and an essential ingredient in meeting the many decarbonisation goals announced. There is an abundance of critical raw materials, strong government support, the cheapest electricity prices in the country, and one of the cleanest electrical grids in the country. However, lower commodity prices have dampened primary mine activity for many critical metals in North America despite the enactment of supportive legislation targeting industry development. The bottom line is that the localisation of raw material supply must reduce the geo-political risks negatively impacting industry growth and derailing the many energy transition goals across many sectors.

Quebec is set to lead the North American energy transition

As we have previously reported (Can Canada become an EV powerhouse?), Canada will need to adapt and expand its mining sector to meet the transformational goals of North America’s auto industry. Ontario has made a formidable push to re-invent its auto sector, and Quebec is at the forefront of building the necessary battery material supply chains to the scale needed to support the many plans that have been announced. The focal point of Quebec’s industrial development, Bécancour, is a port city about 170 km east of Montréal with easy access to Ontario, the US and Europe and is already home to Alcoa (aluminium) and Air Liquide (hydrogen). Automakers have flirted with investing in the province from time to time. Still, real sector development accelerated over the past five years as the sector seeks to reduce its reliance on China for battery material supplies.

Planned plants in the industrial park in Bécancour, Quebec:

• GM and POSCO announced a $600 million facility to produce CAM materials for GM’s Ultium battery (NMCA), which is expected to start production in the first half of 2025. The federal and Quebec governments will each provide $150 million.

• A consortium consisting of Ford Motor Co and Korean companies EcoPro BM and SK on are planning to build a $1.2 billion battery material plant. The federal and Quebec governments will each provide $322 million.

• A $7 billion plant, Northvolt Six, is expected to have a 30 GWh battery cell manufacturing capacity by the end of 2026. The Quebec government promised to provide $2.9 billion, while the federal government is set to contribute $1.34 billion.

• Nouveau Monde Graphite: Broke ground to build its natural graphite anode facility targeting 43,000 tpa of capacity. The company secured multiyear offtake agreements worth US$87.5 million with GM and Panasonic Energy.

• Vale SA concluded a prefeasibility study to produce nickel sulphate using nickel mined from the company’s Voisey Bay operations. The hydrometallurgical facility is expected to produce 25 kt annually and signed a long-term agreement with GM to supply nickel for 350,000 EVs starting in 2026.

Kimberly Berman

Energy Transition Technology and Metals Specialist

Localisation of supply chains will reduce geopolitical risk

Profit margins in the auto sector are razor thin, and halting production lines due to a lack of battery materials is a risk that automakers cannot bear. Profitable production of traditional ICE vehicles involved creating and maintaining local automotive clusters (e.g., the Detroit region) to ensure dependable sourcing of parts and reduce the risk of costly production shutdowns. However, while electric motors are comparatively easier to build, the first point of the EV value chain starts with the extraction of critical minerals. As a result, automakers are now hedging themselves against the price volatility seen in raw material prices over the past few years to de-risk the many EV plans announced. For example, GM has made a $650 million equity investment in Nevada’s Lithium Americas and has partnered with POSCO to build a CAM plant in Quebec.

Currently, the supply of these materials comes from geopolitically sensitive countries and midstream processing to produce the battery grades necessary to scale a China-only phenomenon. Furthermore, domestic production of battery-grade materials that meet North America's more stringent environmental regulations remains elusive.

First and foremost, Quebec has many of the materials, including lithium, graphite and nickel, needed for EV production within its borders, is considered a mining-friendly province and has tremendous government support:

• Lithium: Along with Alberta, Saskatchewan, and Manitoba, Quebec is lithium-rich and home to one of two lithium producers and 49% of the country's lithium projects. However, Canada remains a net importer, relying on Chile (64%) and the US (41%) for lithium and lithium products. Of the 121 tonnes of lithium oxide and hydroxide exported in 2022, 46% more than in 2021, almost all were produced in Quebec and exported to France.

• Graphite: Currently, Northern Graphite’s Lac des Iles mine in Quebec is the only natural graphite mine in Canada and the source of the 13kt produced in 2022 (up 33% from 2021 levels). In addition, many companies are developing graphite assets in Quebec.

• Nickel: Canada produced 143kt of nickel concentrate, 10% lower than 2021 production. While 50% came from Ontario, 27% came from two operations owned by Canadian Royalties and Glencore in the northern tip of the province.

Localising Quebec's EV supply chain

The foundation of clean low-cost electricity gives a competitive advantage

Quebec is recognised as a ‘nation within a united Canada’ and, therefore, has a different legal system (civil vs. common) and business practices (all contracts need to be in French) compared to the rest of the country. However, contrary to other countries with universal federal policies, the provinces have jurisdiction over developing and extracting mineral resources within their borders and mine sites' construction, management, reclamation, and closure. The provinces also have jurisdiction over energy generation except for nuclear energy, which falls under federal jurisdiction and can decide whether to be regulated (Quebec) or deregulated (Ontario).

Quebec is Canada's largest electricity producer, generating 213TWh or 33% of the country. State-owned Hydro-Quebec provides 94% of that electricity from a hydroelectric infrastructure that was built decades ago. This reality translates to having the cleanest electricity generation in the country for more than a century and the lowest electricity rates in North America. While this does not impact EV charging costs, as the cost of ownership is not very sensitive to electricity costs, it is the underlying factor behind industry growth by removing carbon costs from the supply chain from the get-go, offering globally competitive electricity prices.

• A 2021 study by Ibarra-Gutierrez assessing the impact of the province’s low-emission electrical grid showed that local production of lithium and EV batteries would lead to reductions of between 28 and 118 kg CO₂ per ton of LCE compared to importing from the US or China.

• Average electricity prices in Quebec were C$0.0759 per kWh, which is on par with China, compared to $0.1417 per kWh for Ontario and Canada’s national rate of $0.192 per kWh.

• It is widely known that producing battery-grade nickel from nickel pig iron and laterites is two to five times more carbon intensive than processing sulfide nickel ores in Canada.

Emissions intensity of electricity generation
Provinces with lowest CO2 emissions

The impact of gas and electricity prices on Vehicle Ownership
5-year period

US: New EV (BEV+PHEV) unit sales per quarter, 2015-2024
m units

Source: SFA (Oxford), EV-Sales