Much of the current
conversation surrounding electric vehicle manufacturing has focused on sourcing
lithium for batteries. However, another critical component for EVs could come
in short supply in the next few years—electrical steel. Manufacturers in the US
are trying to ramp up production to compete in a foreign-dominated industry.
Analysts estimate that global supplies of
electrical steel—needed for electric vehicle motors—could struggle to meet
demand before the end of this decade. New companies are entering the market to
avoid a crunch that could increase EV prices during a time when we need them to
be more affordable.
Electrical steel is comprised of ultra-thin
sheets that transfer electricity into mechanical power. Standard-quality
electrical steel forms the core of the rotating motors powering things like
washing machines, power transformers, power tools, or air conditioners.
Electric vehicle motors and scientific measurement devices follow the same
principle but require high-grade electrical steel, which is harder to source.
According to a Wall Street Journal report,
making high-grade electrical steel is an exacting process, with lead times
sometimes approaching a whole year. It involves stamping and stacking steel and
silicon into precise shapes, sometimes under a quarter of a millimeter thick,
so companies can't simply buy their way into the market.
The overwhelming majority of electrical
steel currently comes from South Korea, Japan, and China, all of which analysts
say are under US steel import tariffs. Furthermore, global demand for
high-quality electrical steel could exceed supply by hundreds of thousands of
tons by 2027 and over a million tons by 2030.
American companies like Cleveland-Cliffs Inc. and US Steel Corp. are spending
millions to open new electrical steel mills to help close the gap and raise the
country's competitiveness in this specialized sector. The company plans to have
a mill up and running by the end of the year. However, it will likely take
multiple years for domestic manufacturers to acquire the equipment and
expertise to improve supply significantly. The resulting situation could put
downward pressure on EV manufacturing.