(Kitco News) - There are two camps in the lithium space: one camp thinks technology will come to the fore and high lithium prices are making alternative sources of lithium viable, which will solve the world's lithium shortage.
The other camp thinks the path out of our current lithium crunch will be slow and incremental, relying on tweaks to existing operations, as well as slow on-ramping of traditional operations and development projects.
Lithium producers are having a hard time keeping up with demand. Lithium has exploded out of its narrow niche—an ingredient needed to make glass, ceramics and other industrial materials. The silvery-white, highly-reactive metal is a key component in batteries that power portable electronic devices, electric vehicles and stationary storage applications. Battery chemistries vary depending upon the application, but lithium can average about 11% of a lithium-ion batteries' contents.
Since the start of the decade, the Benchmark Lithium Index is up ten-fold.
Energy transition is real, and consumers have made electric vehicles mainstream. By 2025, plug-in vehicles will represent 23% of new passenger vehicle sales globally, up from just under 10% in 2021, writes Bloomberg in its battery metal forecast.
Many of the major automakers have committed to making all-electric vehicles. According to data from Livent, BMW plans to build 22 million electric vehicles over the next decade, about 50% higher than the German automaker previously targeted. General Motors is expecting to launch 30 new global electric vehicles by 2025. It also plans to have an all-electric line-up by 2035.
All those electrical vehicles have the automakers scrambling to secure supply.
"Demand for all lithium products continues to exceed available supply; deficit expected for the foreseeable future," wrote Livent in its recent investor presentation, adding that increased government support has only speeded up energy transition and the need for more lithium.
And lithium miners are benefitting. Lithium giant SQM (NYSE: SQM) is up three-fold. Ablemarle (NYSE: ALB) and Livent (NYSE: LTHM) have both doubled.
There are several sources of lithium, including brine pools, pegmatite rocks, and sedimentary rocks. The largest deposits of lithium are found in South America, specifically in Chile and Argentina. Over 40% of the world's proven lithium deposits are located in the Salar de Atacama. The flats are arid and massive, about 850 square miles.
To make lithium, the brine is evaporated to concentrate the lithium. Once extracted, the lithium must be refined and processed before it can be used in the manufacturing of batteries and other products. Intense water usage has been one major criticism of the brine miners, which may be unfair. Researchers at the University of Massachusetts Amherst found that lithium mining accounts for less than 10% of freshwater usage and its brine extraction does not correlate with changes in either surface-water features or basin-water storage. Still, the salt flats are culturally significant and the footprint of miners is growing.
"The Salar de Atacama is host to a number of ecologically unique wildlife preserves and is also the ancestral home of several Atacameño indigenous communities, with whom the UMass team worked," writes the researchers in the journal Earth's Future. "Because the salt flats are so ecologically sensitive and depend on scarce supplies of fresh water, the use of water in the Salar de Atacama runs the risk of disturbing both the ecological health of the region and the indigenous ways of life."
A second issue with brines is slow throughput, which makes it difficult to ramp up production. SAMCO Technologies estimates that brine processing needed to produce lithium can take anywhere from several months to a few years to complete.
Lithium mining may have been fine the way it was, since the product used to be a niche metal. Now, with spiking demand, business is seeking alternatives around the bottleneck. Some are hopeful that high metal prices and a lot more investment and wider industry focus will solve the production issue.
McKinsey is hopeful. The consultancy wrote in a study published this summer stating that high investment and more industry focus will solve the lithium supply problem. Promising technologies include direct lithium extraction (DLE) and direct lithium to product (DLP). Direct lithium extraction relies on filters, membranes, ceramic beads, and other equipment to extract lithium. DLP technology looks to contain only the lithium metal in a polymer, and then for the lithium to be removed to an electrolyzer tube and made into a final lithium product.
"Alongside increasing the conventional lithium supply, which is expected to expand by over 300 percent between 2021 and 2030, direct lithium extraction (DLE) and direct lithium to product (DLP) can be the driving forces behind the industry's ability to respond more swiftly to soaring demand," writes McKinsey authors. "Although DLE and DLP technologies are still in their infancy and subject to volatility given the industry's ‘hockey stick' demand growth and lead times, they offer significant promise of increasing supply, reducing the industry's environmental, social, and governance (ESG) footprint, and lowering costs, with already announced capacity contributing to around 10 percent of the 2030 lithium supply, as well as to other less advanced projects in the pipeline."
In a spring report Goldman Sachs published its own optimistic findings, stating that high prices are making other lithium projects viable "... specifically from lepidolite (mica), a hardrock lithium resource different to traditional spodumene. We now expect nearly 350kt-LCE of supply additions from China to start producing by 2025E, contributing to nearly one-third of global increments over the period."
Goldman is so confident in these new sources of lithium coming online that it predicts a lithium price collapse.
"We see prices on a downward trajectory over the course of the next two years, with a sharp correction in lithium," writes Goldman Sachs in its report. "Lithium supply should more than double against a 73% increase in demand between now and the middle of the decade. This significant supply growth phase has been catalysed by strong capex flows into projects in Australia, China, Chile and Indonesia in particular where countries' and OEMs' have aggressively pursued securing raw material supply for the EV transition, even as broader mining capex has remained restrained."
Industry veterans remain skeptical. Former managing director of Talison Lithium, Peter Oliver, said in an interview that China's lack of investment in lepidolite projects is telling. And lithium prices have been high for a while now,
"If it was possible and practical and easy, China would've already done it years ago," said Oliver in an interview with Peter Lowry on the Global Lithium Podcast. Oliver noted that China has been investing heavily in sources of lithium from overseas. Oliver said the focus will turn to traditional lithium sources, namely spodumene. And development of those projects will require the long lead times for resource modeling and permitting, nevermind raising funds.
"In my view, there's plenty of spodumene in the world. They're finding more and more in Australia and elsewhere in the world. That's where the focus will be."
