Today’s lithium industry is a story that’s constantly being written, and rewritten, as the landscape evolves. To illustrate, here are just a few highlights since our last blog in October 2022:
Argentina’s lithium exports hit a record high thanks to government initiatives and incentives that make it one of the most market-friendly models in the region. Chile, where growth had stalled, empowered its state-owned copper producer Codelco to negotiate deals with mining companies old and new. And in Bolivia, China’s CATL, the world’s largest lithium battery manufacturer, finalized a $1.4 billion investment to help the company tap the mountain nation’s massive reserves. Meanwhile, new policies, partnerships, and players are radically reshaping supply chains, here and worldwide.
Amid all of these developments, where is the best place to find opportunity? And what challenges should lithium-focused companies keep on their radars.
For answers, we suggest looking at the latest trends in getting this critical metal out of the earth, meeting increased demand, and serving the end us er: the EV driver.
Multiple extraction methods—and complications
To understand prospects in this sector, it’s helpful to understand how companies extract lithium from the earth—and how these processes are changing due to evolving technologies, environmental pressures, and economics.
The rock you’re extracting lithium from makes a difference. Separating lithium from lepodolite crystals, for example, can both incur greater costs and cause severe water pollution. The extraction method you use matters as well. Right now, the majority of lithium is either mined from hard rock, as is the case in Australia, or extracted by metallic brining, which is the method used in the high deserts of South America’s Lithium Triangle.
In brining, a mining company pumps water into the earth, creates large ponds of water, and leaves these ponds to evaporate in the sun, which ultimately reveals lithium crystals ready for processing. Even with months of evaporation time and a lengthy set-up, brining is typically a less-expensive method of lithium extraction than hard-rock mining.
But several variables can stand in the way of success. Lithium recovery in Bolivia, for example, is hindered by low concentrations of the precious metal, high levels of impurities, and a heavy rainy season. On the other side of the world, in places like China’s Qinghai plateau, extremely cold weather poses another obstacle.
Furthermore, while brining is environmentally friendly in its use of solar energy, this method has also contaminated local water basins, drained aquifers, degraded soil, and endangered wildlife from fish to flamingos. Such environmental impacts, plus land rights issues, have sparked opposition from Indigenous communities, from Argentina in South America’s established Lithium Triangle region to Nevada in the southwestern United States, which is experiencing a new gold rush for this critical metal.
And they’re not the only groups pushing back on mining projects. Brining is a hugely water-intensive effort. It can take over 2 million liters of water to produce one ton of lithium. This is forcing difficult tradeoffs with other industries and ways of life.
The promise of DLE
Direct lithium extraction (DLE), a rising alternative, takes brining, million-ton pools of water, and months of processing time out of the equation. The downside: This method has only been used at a handful of mines worldwide, such as a pilot project in Argentina by BMW-backed Lilac Ventures, Breakthrough Energy Ventures. Moreover, DLE methods must be tailored to individual geologies and topographies. The magnesium-heavy rocks of China will require a different approach than the potassium-rich deposits of Bolivia, for example.
Nevertheless, DLE is swiftly catching on, especially in Latin America’s Lithium Triangle. Chilean President Gabriel Boric has outlined a plan to phase out evaporation pools in favor of DLE. Rio Tinto invested in a multibillion DLE project in Argentina. And Bolivia’s state mining operation announced plans to move forward on two DLE plants, working with Chinese battery manufacturer CATL and its recycling subsidiary and mining company CMOC.
Throughout the Western Hemisphere and world, startups like IBAT in rural Louisiana are refining DLE technology and EV-focused automakers are investing in these innovators. In another side of the energy and transportation industry, DLE may give oil producers the ability to filter lithium from water already extracted for hydrocarbons—offering them another revenue stream amid the shift from carbon-based fuels.
Building national capacity amid rising demand
All of these extraction methods, and more, are urgently needed. The earth’s estimated 80 million tons of lithium seems like a sizable reserve—until you consider how this plays out across electric vehicles and other products worldwide. Just one Telsa Model S requires roughly 12 kilograms of lithium, for example, and EVs in general are anticipated to account for 60 percent of new car sales by 2030. And EVs aren’t the only products making claims to the world’s lithium supply. Demand for lithium in battery applications overall is expected to increase by over 300% between now and 2030 in Europe alone.
In this pressing supply-and-demand scenario, nations have been both focusing inward—investing in domestic production after three years of bottlenecks and disrupted supply chains—and looking outward toward new international partnerships.
Take, for example, China. This entrenched leader in the lithium industry makes roughly three quarters of the world’s lithium-ion batteries. But to do this, it must import more than half of the lithium it needs. Meanwhile, Australia is the world’s largest lithium producer, but it ships most of this metal to China for production.
Both nations are aiming to decrease their global dependence. China aims to revitalize domestic lithium production that had been hampered by reductions in EV subsidies. As for Australia, Mining.com reported how “Canberra and Washington are trying to work with diplomatic and economic partners to build their critical minerals industries and break China’s monopoly in certain areas that produce materials vital to high-tech manufacturing in the defense, aerospace and green economy sectors.”
Countries worldwide are moving fast to build—and protect—their critical minerals industries. Namibia, for example, recently banned exports of unprocessed lithium and other minerals for clean-energy technologies. “We need to get more out of our resources,” Mines and Energy Minister Tom Alweendo told Yahoo Finance.
On a larger scale, the United States passed the Inflation Reduction Act to invest billions in the sector and move manufacturing and production within domestic borders. In the EU, the Critical Raw Materials Act similarly aims to secure its domestic lithium supplies, with a framework for strengthening its supply chains and a target of meeting 10% of mined demand for critical minerals.
New players and partnerships
At the same time, cross-border expansion and partnerships continue apace as nations realize the difficulties of going it alone. The European Union recently signed a memorandum of understanding to develop lithium projects in Chile. And China’s been paying attention to Africa’s lithium reserves, with Ganfeng Lithium and Australia’s Leo Lithium partnering on the Goulamina Lithium Project in Mali. Goulamina will be West Africa’s first producer of spodumene, a mineral known for its high lithium content.
New players are entering the lithium ecosystem as well. “Lithium Scarcity Pushes Carmakers Into the Mining Business,” a July 2 New York Times article, announced new deals by Ford with Chile’s SQM and General Motors with Philadelphia-based Livent for material from South American mines. “We quickly realized there wasn’t an established value chain that would support our ambitions for the next 10 years,” GM’s Sham Kunjur told the Times.
Meanwhile, could South America’s Lithium Triangle be expanding? In Brazil, Canada-based Sigma Lithium Corp has received approval to operate its hard rock mine in Minas Gerais. American Lithium Corp, also from Canada, received approval for new exploration in Peru. “A window of opportunity has opened and we want to take advantage of it,” Economy Minister Alex Contreras told Reuters after Chile launched its plan for state control.
Innovations to serve the EV end user
As the global shift continues from carbon-fueled transportation to electric vehicles, it’s important to remember the millions of drivers worldwide who are unable to afford or finance a new Tesla, Lucid Air, or Ford F-150 Lightning. Manufacturers are responding with smaller, more budget-friendly offerings, from Bolivia’s Quantum, whose small EVs cost just $6,000, to China’s mini and micro EV sector. In April, China’s largest automaker BYD unveiled the Seagull, with a starting price of just $11,000.
But this is just one area of innovation related to the lithium and EV revolution. Battery recycling and converting diesel vehicles to electric are two areas to watch. So is charging infrastructure—an essential component to overcoming “charge anxiety” among buyers and driving sales of EVs—and the lithium batteries that power them. In Argentina, ChargeboxNet is contracted to build over 1,500 charging stations for a variety of global brands. In Chile, Copec Voltex, cited among Fast Company’s Most Innovative Latin American Companies for 2023, is building a nationwide EV charging network across the country. Companies from outside of Latin America, like Wallbox and Circontrol from Spain and Blink from the US, are making their presence known with their charging products as well.
Finally, it’s important to track innovations with the potential to shrink, or eliminate, the EV-focused lithium market altogether. These include sodium-ion batteries, which offer the advantages of widely available raw materials and rapidly scalable technology based on existing production methods.
Ready to find your place in the evolving lithium ecosystem? Specialized consultants and advisors can help. For more information, contact us.