Critical mineral processing will protect Canada’s EV industry

Canada’s richness in critical minerals lies at the heart of our strategic bet to build the coming generations of electric vehicles and the specialized batteries they run on. But that mineral wealth also represents a generational opportunity to build economic autonomy by doing two things that have historically been very un-Canadian: add value to our natural resources, and link them with downstream domestic manufacturing. Doing so will reinforce Canada’s downstream EV supply chain while also opening up opportunities in other sectors. United States President Donald Trump’s threat to use tariffs to “permanently shut down the automobile manufacturing business in Canada” is no idle boast. It takes aim at one of our economic strengths. Canada’s largest critical mineral exports in 2023 were aluminum (30 per cent), potash (23 per cent), copper (18 per cent), nickel (11 per cent), uranium (six per cent), and zinc (four per cent). Trump’s threatened 10-per-cent critical mineral tariff would affect 59 per cent of those exports. Most of those exports are heavily skewed towards upstream “primary products” like copper concentrate or smelting and refining products from metallurgical processes that produce relatively pure minerals, metals, and alloys. Canada’s expertise in smelting and refining is focused on copper, nickel, and aluminum. This segment is highly vulnerable to tariffs, as shown by the current steelwork and aluminum sector crisis linked to an overreliance on U.S. buyers. And the lack of processing capabilities in the “mine-to-mobility” EV supply chain leaves us further exposed to trade risk, as mined minerals currently need to be exported for processing then re-imported to feed battery production. The uncertainty risks undermining a key element of the appeal for locating the battery plants in Canada in the first place: efficiency gains via a reliable, local supply of critical minerals. Travis Southin, left, Derek Eaton, and Sosthène Ung. Handout photographs Processing remains the weakest link. Natural Resources Canada modelling finds that the country has enough planned lithium, graphite, and nickel mining projects to meet the demand for four battery factories—provided their financing, technical, or infrastructure needs are met. However, they emphasize that “Canada currently faces gaps in midstream processing” as 19 new midstream processing facilities are needed. This includes seven nickel sulphate plants, five lithium hydroxide plants, five coated spherical purified graphite plants, and two lithium carbonate plants. Industry roadmaps developed by Accelerate and the Battery Metals Association of Canada emphasize that extracting greater value from our critical minerals requires a shift to producing advanced materials such as semiconductors, cathode and anode active materials, refined chemical precursors, and permanent magnets. That’s where billions of dollars of value lie. With "newer" metals such as lithium, moving from spodumene ore to lithium hydroxide or lithium carbonate increases the value by a factor of four or five times, for example. The opportunities extend beyond the auto sector. A common theme at the recent Prospectors and Developers Association of Canada conference in Toronto was the urgent need to connect domestic processing of minerals to burgeoning demand as inputs to products ranging from power, artificial intelligence, robotics, drones, and autonomous devices. There was a shared sense that developing domestic processing capacity was essential to opening lucrative new markets in Asia and Europe. Adding value to critical minerals entails high capital costs in the face of price volatility. And we need to prove that we can actually get shovels in the ground, and secure the sales contracts to reassure potential investors. Success also demands forging meaningful Indigenous partnerships. Some solutions have been proposed. For instance, the Canada Growth Fund could use contracts for difference to provide price stability for both mining and processing projects. Encouragingly, the federal government’s $1.5-billion Critical Minerals Infrastructure Fund’s “directed intake” stream enables a proactive identification of strategic projects. Another positive sign is potential joint federal-Ontario funding for Canadian-owned Frontier Lithium’s processing plant in northern Ontario. Importantly, both governments expressed openness to keeping all options on the table with regard to the possibility of export fees on sales to the U.S. This builds on previous joint investment in rare earth processing in Saskatchewan. To be clear, the challenges to the EV sector go beyond Trump’s tariff threats, and his desire to annex Canada for our critical minerals. Northvolt’s bankruptcy underscores the wider challenges facing the EV sector. But the benefits of processing our underground wealth go beyond this moment of crisis, and in fact beyond the auto sector alone. Strengthening Canada’s critical mineral processing is a smart move regardless of whether we eventually reconcile with the Americans—or ultimately have to go it alone. Travis Southin is the future economy lead at the Transition Accelerator. His past experience includes providing analysis and policy recommendations for the Net-Zero Advisory Body, and working with James Meadowcroft as a postdoctoral fellow at Carleton University’s School of Public Policy and Administration. Derek Eaton is the director of future economy at the Transition Accelerator, and an economist with more than 30 years of experience in developing policy insights and recommendations to integrate sustainability into decision-making. He has previously served in roles including as senior director of public policy research at the Smart Prosperity Institute, and as a principal consultant for Technopolis Group. Sosthène Ung is a senior future economy analyst with the Transition Accelerator, specializing in critical minerals and metal processing. He holds a MSc in organic chemistry, and a degree in chemical engineering from Montpellier, France, and also graduated from McGill University in 2022 with a PhD in green chemistry. The Hill Times

Critical mineral processing will protect Canada’s EV industry

The lack of processing capabilities in the ‘mine-to-mobility’ EV supply chain leaves us further exposed to trade risk.

To keep reading, subscribe and become a political insider.

Only $7.76 a week for an annual subscription.

Basic income a proactive policy in difficult times

Trump: a suite of global dangers

Donald Trump as a George Orwell ‘nationalist’

Foreign interference: ideas and nations

Keeping the ‘rule of law’ alive

Prime Minister Carney’s ascension brings lots of change for cabinet staff

Cancelling the F-35 deal would be ‘cutting our nose off to spite our face,’ says former senior military official

Science under pressure: a call to action

Restrictions on living abroad: the inequality of Canada’s pension portability

Prime Minister Carney’s first decision is a tough one

Liberal majority in play

Liberal majority in play

News

Get free news updates

Opinion

Submit a guest opinion article

resources

Follow us

Advertise

subscribe

get help

Get free news updates

Submit a guest opinion article

Critical mineral processing will protect Canada’s EV industry

The lack of processing capabilities in the ‘mine-to-mobility’ EV supply chain leaves us further exposed to trade risk.

To keep reading, subscribe and become a political insider.

Only $7.76 a week for an annual subscription.

Get The Foreign Policy Newsletter