Global demand for lithium is set to explode thanks to the insatiable demand for electric batteries. A typical electric car battery requires 8 kg of lithium. The International Energy Agency (IEA) estimates that demand for lithium will increase by 40 times from 2020 to 2040.
Lithium is the lightest and least dense of all the metals, that and its high energy density makes it the ideal component for batteries. Currently, the production of lithium is dominated by just a few countries, Australia, Chile, China and Argentina.
Chinese factories dominate the refining of lithium (refining turns it into lithium hydroxide which can used in batteries.) as well as manufacturing the lion’s share of electric batteries. This means that Chinese firms hoover up lithium supplies from across the world dominating its supply chain.
Electric batteries are set to be one of the critical industries of the future as the world tries to decarbonise by weaning itself off polluting petrol cars. Electric vehicles have reached over five percent of global car production as manufacturers switch focus . The market for electric vehicles is expected to reach US$ 827 billion by 2030.
Now other nations have woken up to how much China power has amassed over the years. Many governments are now taking action to ensure they can take a slice of this critical industry.
The US, EU, India and many other countries want to make sure they can establish their own electric battery manufacturing sectors and avoid dependence on China. Part of this means ensuring cheap, reliable supplies of lithium. The scene is set for a battle between the great powers to control the supply and processing of this white gold.
Demand for lithium could grow to more than 40 times current levels if the world is to meet its Paris Agreement goals.
Chinas’ New Frontiers
Sinomines a Chinese mining conglomerate which is at the vanguard of China’s global commercial rise has recently invested in Bikita lithium mine in Zimbabwe. The mine around 320 km from the capital Harare underlines increasing Chinese investment in the economy which many western firms have fled.
China has also been establishing relations with the isolated Taliban Government in Afghanistan. Chinese mining giant Metallurgical Group Corp (MCC) have been looking to reopen copper and oil interests in the country. Other Chinese miners are rumoured to be considering extracting lithium in the country. Surveys conducted by the Soviet and US geologists over the last four decades indicate that the country has commercially viable lithium reserves around some of the country’s salt lakes.
Recent reports indicate that the Mes Aynak (reputedly the second richest in the world) copper mine in Afghanistan will open soon. The political and security situation in Afghanistan remains highly fragile, but demand is such that Chinese miners could be ready to extract lithium there soon.
An OPEC for Lithium?
Countries which produce and have deep reserves of lithium are looking to protect their own interests. Argentina, Bolivia and Chile are in advanced talks to create an organisation with the purpose of controlling the price of lithium. Indonesia is rumoured to be looking at starting another organisation based around the supply of other minerals vital for building batteries.
OPEC has had its ups and downs over the decades. But the organisation been highly successful in protecting the interests of major oil producers. However, the prospect of South American countries could raise the hackles of consumers like China and the US. Any attempt to control the supply of lithium may be met by a counter response. China and others could cut flow of capital and expertise needed to extract or mine lithium.
Countries that are building batteries are also looking to protect their interestes. Initiatives like the critical mineral partnership are an attempt by battery manufacturers to build reliable supply chains for critical minerals like lithium.
The biggest threat to Chinese dominance could come from the earth’s crust. Lithium is found in plentiful amounts in below the ground across the globe. Australia already produces vast quantities of lithium which is mined rather than extracted from brine. The giant Greenbushes mine alone produces a 5th of all global production. However, Australia has lacked refining capacity – turning the lithium into a usable lithium hydroxide which can be used in batteries.
The cost of extracting the metal is the main variable which determines price. High sustained demand will encourage others to try and mine lithium. The US is now looking to expand domestic production. Cornwall in the UK which was a mining powerhouse for many years is also now looking to open lithium mines. New innovative methods to extract the metal will likely emerge. All these factors should diversify the supply of the metal.
Although it takes 4 to 5 years to bring new mines online, capacity now looks set to grow rapidly. As electric batteries become more popular the potential for recycling them should increase which could also affect demand.
Dependence on lithium has pushed producers to look at alternatives such as sodium, magnesium, sea water and tungsten. However, none of these metals has been used at the scale in the way lithium batteries have.
What will the future bring?
As the demand for lithium grows so will the incentive to increase production. But new mining projects are capital intensive and can take years to become productive. Recycling, use of alternatives and new production should all ensure that there is no shortage of lithium in the long term. Lithium supplies are a crucial part of the global energy transition which means a shift from hydrocarbons to metals and minerals and that will also transform geopolitics for years to come.