Is There Enough Lithium for Massive EV Adoption?
Electric vehicles require six times the mineral inputs of conventional cars, according to the International Energy Agency. The lithium required for the batteries that power those vehicles poses a challenge to the EV supply chain. Established mining companies currently don’t have enough lithium to supply the automotive industry.
The IEA estimated in a 2021 report that mineral demand for use in EVs and battery storage could grow 30 times by 2040.
General Motors, Volkswagen, Ford, BMW, and other large automakers plan for all their car sales to be electric by 2035. In the first quarter of 2023, according to Kelley Blue Book, sales of battery-powered cars, plug-in hybrids, and other electric vehicles in the U.S. rose 45 percent from last year.
Lithium prices rose more than 400 percent in 2021, stopping the rapid decrease of new battery costs. The largest deposits of the metal are in countries such as Chile, Australia, Argentina, Bolivia, and China. Mining, transportation, and processing are the biggest challenges for the supply chain.
Credit: Gladis Bravo
Lithium has become the subject of resource gambling in countries and regions such as China, the United States, Japan, Australia, and the European Union.
The most significant reserves of lithium ore are in South America, in the so-called Lithium Triangle, where Chile meets Bolivia and Argentina, a swath of remote desert and highlands that contains 53 percent of the world’s lithium deposits. The brine concentrates by evaporation. Lithium, after the brine is treated to purge metals such as sodium and magnesium, precipitates as lithium carbonate.
The largest area of the Triangle is in Chile, with more than 20,000 metric tons of lithium reserves. Currently, around 60 percent of the world’s lithium production comes from the brine evaporation ponds in the Triangle.
Bolivia could come second in reserves. Some estimates, including one from the U.S. Geological Survey, claim that the South American country could have over 21 million metric tons of lithium but, as yet, has almost no industrial production or commercially viable reserves. Bolivia may be rich in natural resources, but it is an impoverished country, which makes the chances of autonomously running lithium-mining projects slim.
That could change this year. Recently, Chinese battery maker CATL completed an agreement with Bolivia to invest $1.4 billion in two lithium projects. Companies have yet to show sustained interest in the country, known for its political instability.
The Chile factor
Of the three countries in the Triangle, Chile has the best technology and experience in mining minerals. It is also the world’s largest producer of copper. Chilean companies have recently reached mining agreements with Bolivia and Argentina to exploit its reserves.
U.S.-based Albemarle Corporation and Sociedad Química y Minera de Chile (SQM) are exploiting the brine deposits in the north.
SQM’s largest shareholder, Julio Ponce Lerou, amassed his fortune during the dictatorship of his former father-in-law Augusto Pinochet. During the military dictatorship, the government transferred the then-state company to Ponce Lerou for 20,300 million pesos by transferring 93 percent of the shares.
In April, Chilean President Gabriel Boric announced a new strategy that will put the state in a central role in developing the lithium industry as demand soared.
Codelco, the state-owned copper mining company, is looking at forming public-private partnerships for lithium extraction. Maximo Pacheco, Chile’s former energy minister and current chair of Codelco, wants a mandate for securing 51 percent stakes in consortiums with the existing producers. “Because of the sense of urgency we all have given the prices and demand for lithium in the world, I believe it’s something we should solve during this year,” he told the Financial Times.
“The policy will likely have the opposite effect,” said Juan Carlos Guajardo, executive director of Plusmining, a mining consulting firm in Chile. Investors will be put off by the central role given to state mining companies, slowing production. “Resource nationalism is spreading around the world, but in Latin America, it is quite strong,” Guajardo told the Wall Street Journal.
China’s lithium vulnerability: reliance on imports set to grow this decade
While China has some of the largest lithium deposits worldwide and is currently its largest producer, its demand for the metal is much greater than its production capacity and, according to industry experts, is expected to grow.
Mineral demand growth from new EV sales by scenario, 2040. IEA, Paris IEA. License: CC BY 4.0.
“Long-term changes in China’s ultimate recoverable lithium reserves would not significantly impact lithium supply chain security,” says a 2022 paper from the School of Economics and Management, Wuhan, and the Institute of Industrial Economics, Chinese Academy of Social Sciences, Beijing, China. “Contrary to this, the development of the EVs industry would result in a significant increase in China’s demand for lithium, which might adversely affect the security of the country’s supply chain for lithium in the future. The domestic lithium supply chain was able to withstand the short-term impact of the Pandemic, but overcapacity intensified as a result.”
Carmakers in the mining business
What impact will the limited supply of materials have on the future of EV adoption?
Lithium shortages have forced carmakers, which have deeper pockets, to directly acquire the essential metal and send it to battery factories, some owned by suppliers and others owned partly or entirely by the automakers.
Ford Motor has made deals with SQM, Albemarle, and Nemaska Lithium of Quebec. Tesla, which has built a supply chain for lithium and other raw materials over the years, has steadily gained market share in China, Europe, and the United States. It is now California’s second-largest seller of new cars after Toyota.
Automobile companies scramble to access exclusive access to smaller mines before others swoop in. But the strategy exposes them to the risky, boom-and-bust business of mining, sometimes in politically precarious countries with inadequate environmental protections. If they bet incorrectly, automakers could spend far more for lithium than it might sell for in a few years.
Dozens of companies are developing mines, and there may eventually be more than enough lithium to meet everybody’s needs. Global production could surge sooner than expected, leading to a collapse in the price of the material, something that has happened in the recent past.
Reusing lithium from spent batteries can help alleviate the demand
Millions of Li-ion batteries are discarded from computers, smartphones, used cars, and other battery-operated devices every year.
Lithium supply remains low compared to the rapidly growing demand, which has seriously threatened the sustainability of the new-energy industry. To overcome this problem, lithium recycling from the growing number of spent batteries has aroused public attention, which not only helps secure a steady supply of the metal but also reduces environmental pollution.
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