The Demand For Lithium Outweighs The Supply

As the demand for lithium for storage batteries increases, it has created pressures on the lithium mining and processing sector. No one was prepared for the demand as electric car sales went from near zero a decade ago to over half-a-million last year.

The battery in Elon Musk’s Tesla Model S uses 45 kilograms (100 pounds) of lithium carbonate, and this is just one model and one car manufacturer’s battery. Worldwide, that figure can reach into the hundreds of thousands of tons of the metal.

And even though there is plenty of lithium around, the emerging problem is having enough capacity to process it. Lithium-ion batteries used to power electric vehicles use lithium carbonate or lithium hydroxide, but most of the time, industry refers to the two in terms of lithium carbonate equivalent, which contains both of them.

Where is lithium found?

There are two major types of lithium deposits in the world. One is a hard rock as found in Australia, for which ready-to- go capacity to produce battery grade lithium can take up to three years. Lithium in Chile and Argentina is found as a brine, and the time to produce a battery-grade lithium can take up to seven years. China has reserves of both types of the mineral.

As a matter of fact, it has been estimated that by the year 2025, the world will need to be producing 785,000 tons of lithium carbonate equivalent a year, and that will be a 26,000-ton shortfall, compared to the 217,000 tons of demand versus 227,000 tons of supply this year, according to Roskill Consultants Group.

And despite Musk’s Gigafactory here in the U.S. and others globally in operation or being planned, the market from top to bottom is still dominated by Asia, with Roskill predicting China, Japan and Korea could account for 70 percent of consumption by 2025.

Investment in new lithium projects

Earlier this month, Bloomberg reported that the mining boom in lithium was becoming somewhat like the oil boom of the 1960s and 1970s. Simon Moores, managing director of Benchmark Mineral, while talking to Bloomberg by phone said, “There are serious companies investing and people are starting to lock up the biggest, long-life resources. The question is — who’s next?”

“We estimate the lithium industry is going to need between $4-$5 billion of investment out to 2025,” said Moores. Benchmark Minerals Intelligence is a price data collection, and assessment company specializing in the lithium ion battery supply chain.

Benchmark is forecasting lithium carbonate will average $13,000 a ton over the 2017-2020 period from around $9,000 a ton in 2015-2016. However, with the demand for lithium hydroxide being greater because it gives greater battery capacity and longer life, prices are expected to jump from the current $14,000 a ton to over $18,000 a ton between 2017 and 2020.

So what is the bottom line here? Wood Mackenzie consultant James Whiteside, in discussing some of the start-up problems being encountered with small companies, cited Australia’s Orocobre, which planned to produce 17,500 tons a year of lithium carbonate at its Olaroz facility in Argentina.

They ran into problems with the weather and with pump glitches that threw them 21 percent below their initial target through June of this year. And while they are getting back on track, Whiteside said Orocobre’s difficulties are typical of many smaller operators. He also noted that the facility was the first new brine operation in 20 years.

“Because the number of brine operations has been so few historically, there are very few technically experienced chemical engineers to assist these junior companies,” he said. And this is the whole message in a nut-shell, the technology has to be addressed and updated if the world is to continue its move toward zero-carbon emissions.

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