The Strategist

Why the world needs more lithium

09/15/2017 - 14:49

There are many technologies and materials to meet the needs of the growing market of electric vehicles, but there are not enough lithium deposits. Fears of a shortage of lithium appeared about two years ago and led to a jump in prices for this metal almost three times high in just 10 months. The current price of lithium exceeds 20 thousand dollars per ton. The reason was a sharp increase in the output of electric vehicles. The industry began to take away a significant part of lithium-ion batteries from manufacturers of laptops and smartphones. According to Bloomberg New Energy Finance (BNEF), demand for metal will not decline in the near future. On the contrary, it is expected that the production of electric vehicles will increase by more than thirty times.

There is enough lithium on Earth. Less than 1% of the planet's existing reserves of this metal will be used over the next 12 years. However, battery companies will need more lithium deposits and they will have to start their development much faster than anyone could have guessed.

According to BNEF, by 2030, industry leaders, such as Tianqi Lithium, SQM, Albemarle and FMC, will have to supply a volume of lithium sufficient to supply plants whose total capacity is equivalent to 35 plants currently being built in Nevada by Tesla Gigafactory. According to analysts of the research group Sanford C. Bernstein & Co., the total investment in new fields, including in extraction of other elements used in lithium-ion batteries, will amount to 350 to 750 billion dollars.

Mining companies have to work in areas with an unstable environmental situation. Some of the states restrict the extraction of lithium. About half of the world's reserves are located in Chile, mainly on the arid plateau of Atacama, which lies on the border with Argentina and is the homeland of shepherds. They are concerned about the problems of environmental pollution and lack of water, which usually come with miners, as well as with possible damage to sacred places. Another deposit is situated in the picturesque English county of Cornwall, famous for its melted cream and beaches in pirate bays.

Mining companies have promised to open 20 new lithium mines in addition to 16 operating mines. Yet, they may not have enough time to start working to meet the growing demand on time. The first new mine is expected to be opened in 2019. However, Mark Cutifani, chief executive officer of mining company Anglo American Plc, considers the opposite problem more pressing: "Now there are many projects, and eventually it will lead to excess supplies".

But even if the companies will experience some difficulties with meeting the demand, this worldwide struggle may not affect Tesla or MacBook Pro price tag at all, believes Edward Spencer, senior consultant to the London-based research company CRU International Ltd. "The cost of lithium is absolutely insignificant compared to the total price of the car," he says. Founder of Tesla, Elon Musk, once called lithium the "salt in salad." It's just important for him to be sure that the supply of this metal will be stable.