No images? Click here Welcome to The Corner. In this issue, we take a look at how electric vehicle manufacturers’ move into the lithium business could lead to a lithium shortage, shortchanging sectors like solar and wind.
Audrey Stienon Automakers are taking aggressive steps to secure lithium supply for electric vehicle (EV) battery production, in some cases going so far as buying majority stakes in mines and even building their own lithium refineries. The automakers argue these deals will help prevent an impending lithium shortage from delaying their EV production goals. And these new investments indeed appear to be resulting in increased lithium production and other innovations within the industry. Unfortunately, the moves to lock up lithium supply appear to pose a variety of threats to many other industries that depend on batteries. This includes renewable energy businesses, many of which are already struggling to find sources of metal not locked down by the automakers. Although some say such a lithium shortage would be temporary, any major disruption in the production of non-vehicle batteries could prove devastating to the broader electrification of the U.S. economy. The long-delayed mobility transition got a boost from tax credits included in the Inflation Reduction Act (IRA) for EV purchases, provided a sufficient share of their components are made in the U.S. or other qualifying countries. In the year since Congress approved the Inflation Reduction Act - with its unprecedented subsidies for EVs and other green technologies - automakers have scrambled to lock up lithium markets. General Motors, for instance, made a $650 million equity investment to become the majority shareholder of Lithium America; Tesla broke ground on the construction of its own lithium refinery; and Ford loaned $300 million to the miner Liontown Resources. Competition authorities have long frowned on efforts by corporations to buy their upstream suppliers when doing so would give them the ability to restrict competitors’ access to critical inputs—a tactic known as foreclosure. By contrast, competition law enforcers have generally tolerated such “vertical integration” in complex industries such as automobile production. The basic assumption was that gains in efficiency within auto companies, and in resilience across the sector, outweighed any near-term harms to competition in the public market for a particular component and material. Lithium industry experts echo these traditional arguments, and say that the automakers’ investment in lithium production is resulting in a speedy expansion of manufacturing capacity, which will likely soon result in increased competition and innovation in the industry. This marks a sharp reversal from the pattern of recent years. Despite long-standing projections that global lithium demand could rise between three- and five-fold between 2020 and 2030, existing lithium producers made little effort to expand. Until recently, the main problem was low prices due to low demand. One mine in Quebec, for example, closed twice in less than a decade after its owners went bankrupt. This volatility made it difficult for these mining corporations to secure the sorts of long-term investments necessary to bring a new mining project to market, a process that can sometimes take more than a decade. Chris Berry of House Mountain Partners estimates that the industry needs to open between four and five new mines each year between now and 2030 to keep up with the surging demand. The new relationships with automakers are particularly important for smaller lithium producers, who have struggled to attract investment and compete against larger miners. North America Lithium, the twice-bankrupt Canadian mine, reopened after Tesla signed an agreement with its new owner. One industry where producers are concerned about the new relationships between automakers and lithium suppliers is the electric storage system (ESS) sector. The industry is a key link in the larger renewables sector, and any delays in the production and deployment of ESS would slow growth in key renewables like wind and solar. Fastmarkets forecasts that ESS lithium demand will grow by 48% annually through 2026, outstripping the 31% growth expected from EVs. Nonetheless, ESS’s overall market footprint is much smaller, and the industry’s engagement with lithium producers has been more restricted. The automakers have other advantages over rival lithium consumers. As one industry expert noted, “it gives the [mining] company more negotiating power when they can go in with GM and say to the government: ‘we need this project advanced.’” Less than a week after GM announced its investment in Lithium America, for example, a U.S. judge greenlit construction at Thacker Pass, the company’s Nevada mining project that had been mired in a years-long lawsuit. GM will have rights to all the lithium from Thacker Pass. Some companies, like LG Chem, produce batteries for both EV makers and ESS producers. But here too the automakers efforts to directly engage lithium producers may push such companies to prioritize EV battery production.
Open Markets and Farm Action Grade Biden Agencies on Reducing Food Consolidation Open Markets Institute and Farm Action on July 17 unveil a joint “report card” grading the Biden administration’s progress in reducing concentration in the food and agriculture sectors. “A 2023 Review of the Biden Administration’s Commitment to Food System Competition” looks closely the Justice Department, Federal Trade Commission, and U.S. Department of Agriculture’s progress on all the food- and farm-related directives from the White House’s July 2021 executive order promoting competition throughout the economy. It was the second such review by Open Markets and Farm action, and follows a similar report card in June 2022. This year’s report recognizes that each agency made important improvements over the past year. But it also made clear that there is still a lot of essential work outstanding, and that all three offices need to speed their efforts to urgently to deliver long overdue reforms for farmers, workers, and consumers. Read the full report for our new grades and assessments.
Open Markets Institute Hails New Merger Guidelines Replacing Consumer Welfare Standard Open Markets Institute executive director Barry Lynn lauded new merger guidelines released Wednesday by the Federal Trade Commission and Department of Justice that overturn Reagan-era guidelines that led to massive corporate consolidation across the U.S. economy. The widely anticipated new guidelines revive market-share tests for challenging mergers, replacing the consumer welfare philosophy that guided the previous merger guidelines. “There are many flaws with the ‘consumer welfare’ philosophy. Most dangerous is that it replaced simple rules governing market structure and corporate behavior with subjective attempts to predict consumer effects of mergers on a case-by-case basis,” Lynn said. “The result was a de facto license for the powerful few to build systems of autocratic control over the many,” Lynn’s statement was covered by Truthout. 📝 WHAT WE'VE BEEN UP TO:
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We appreciate your readership. Please consider making a contribution to support the continued publication of this newsletter. 📈 VITAL STAT:$596.27The price per carton at which Mark Cuban’s Cost Plus Drugs will sell a generic version of Humira, a rheumatoid arthritis drug, vastly undercutting the list price of $6,922. AbbVie has long held a monopoly on the drug, once the world’s biggest selling medication, but Coherus Biosciences will soon release a biosimilar version of Humira called Yusimry. (Reuters) 📚 WHAT WE'RE READING:“Attacks on Tax Privacy”: A new report led by Senator Elizabeth Warren details how tax preparation companies like H&R Block and TaxSlayer allowed Facebook and Google to get their hands on the sensitive tax information of millions of Americans in a potential violation of federal law. Facebook has used that data to serve advertisements. Authors argue that their findings bolster arguments for the IRS’s development of a public tax filing option by demonstrating that “Big Tax Prep” is incapable of safeguarding taxpayer information. 🔎 TIPS? COMMENTS? SUGGESTIONS? We would love to hear from you—just reply to this e-mail and drop us a line. Give us your feedback, alert us to competition policy news, or let us know your favorite story from this issue. |