Sunday, May 9, 2021

Electric Vehicles Will Drive A Lithium Supply Crunch

From the brainiacs at IEEE Spectrum, May 5:

Analysts warn that rising battery demand will constrain supplies, though there's plenty left to mine

A carbon-free future will require many millions of batteries, both to drive electric vehicles and to store wind and solar power on the grid. Today’s battery chemistries mostly rely on lithium—a metal that could soon face a global supply crunch. Some analysts warn that as EV production soars, lithium producers won’t be able to keep up with demand. That could temporarily pump the brakes on the world’s clean energy ambitions, they say. 

How big the lithium shortage will be, and how much turmoil it will cause, is far from certain.

Recently, Rystad Energy projected a “serious lithium supply deficit” in 2027 as mining capacity lags behind the EV boom. The mismatch could effectively delay the production of around 3.3 million battery-powered passenger cars that year, according to the research firm. Without new mining projects, delays could swell to the equivalent of 20 million cars in 2030. Battery-powered buses, trucks, ships, and grid storage systems will also feel the squeeze.

“A major disruption is brewing for electric vehicle manufacturers,” James Ley, senior vice president of Rystad’s energy metals team in London, said in a news release. “Although there is plenty of lithium to mine in the ground, the existing and planned projects will not be enough to meet demand for the metal.”

A lithium deficit would flip what is currently a surplus. Demand from battery manufacturers is now about 300,000 metric tons of lithium carbonate equivalent (LCE) per year, while there is 520,000 metric tons of existing mining capacity for battery markets. Rystad’s analysis shows that demand from manufacturers could reach 2.8 million metric tons in 2028. However, mining capacity is only expected to reach about 2 million metric tons that year, assuming no new mining projects are added to the current pipeline. 

A world in which EV assembly lines gather dust while battery manufacturers scrabble for scraps of lithium is wholly avoidable. But for producers, the solution isn’t as simple as mining more hard rock—called spodumene—or tapping more underground brine deposits to extract lithium. That’s because most of the better, easier-to-exploit reserves are already spoken for in Australia (for hard rock) and in Chile and Argentina (for brine). To drastically scale capacity, producers will also need to exploit the world’s “marginal” resources, which are costlier and more energy-intensive to develop than conventional counterparts.

“It’s not that it’s a resource issue. There is no fear that there is not enough lithium to meet demand by 2030 or longer,” Sophie Lu, the head of metals and mining for BloombergNEF (BNEF), said by phone from Sydney. The larger question, she said, is whether the industry can continue producing lithium at similar costs as today, while also diversifying supply chains away from today’s dominant geographies and doing so without causing environmental damage.

In its latest outlook, published Wednesday, BNEF said there are enough lithium projects in the pipeline to meet demand out to the late 2020s—assuming projects are successfully financed and developed. But a supply deficit may kick in around 2028, Lu said. Nearly $14 billion is still needed to finance the pipeline of lithium production capacity out to 2025, though this pipeline surpasses BNEF’s forecast for demand by that year....


And related, though this piece has been in the link-vault for a few years I'll probably be referring back to it. From Verisk Maplecroft, March 26, 2018:

China’s lithium supply chain strategy
Solidify, diversify and control

China has a blueprint to steer the world’s largest auto market away from combustion engines towards a battery-powered future, but it will only succeed if it can secure a reliable supply of the minerals and metals necessary for the production of lithium-ion batteries. Lithium is unsurprisingly a priority on this front. Indeed, the wheels will fall off Beijing’s strategic play to transition towards electric vehicles (EVs) unless China can meet its soaring demand for ‘white petroleum’ amid a global rush.

There are several factors underpinning China’s EV plan. Above all, Beijing sees it as a means to reduce its dependence on oil imports, tackle chronic air pollution, meet its Paris climate targets and create a poster child for the ‘Made in China 2025’ initiative to upgrade the manufacturing sector.

For China to bolster its supply of lithium, we believe that Beijing will likely pursue three strategic objectives in 2018 (and beyond) – namely, to develop its domestic lithium resources, diversify its lithium imports, and increase its influence over the global lithium value chain. The progress China makes towards furthering these goals will go a long way to determining to what extent it can meet its EV ambitions.

Objective 1: Develop domestic lithium resources

China is heavily dependent on imports to satisfy its lithium raw material requirements, so developing its domestic resources is a pressing matter. The country is already the world’s largest consumer of lithium compounds, and domestic demand is set to skyrocket over the coming decades as China switches to EVs. The government wants to see 2 million EVs sold annually by 2020, would like EVs to account for a fifth of new vehicles sales by 2025 and is working on a timetable to phase out traditional vehicles altogether.

The pressure to improve self-sufficiency in supplies of lithium mineral resources (and in other minerals and metals essential in the production of batteries) mirrors the pressure the country faces to reduce its reliance on energy imports. In our Energy Security Index in 2018-Q1, China is the worst-performing country globally in terms of the energy self-sufficiency indicator, as it must import around half its energy needs.

In terms of the scope to expand its domestic lithium output, according to the US Geological Survey China is home to the world’s fourth largest lithium resources and second largest reserves. Yet the Middle Kingdom currently accounts for only around 6% of global mine production, placing it far behind heavyweights such as Australia (41%), Chile (34%) and Argentina (16%). Large-scale domestic extraction has yet to take off because both brine- and rock-derived lithium present problems for producers: the quality of China’s brine deposits is generally lower than that of the deposits found in the ‘Lithium Triangle’ of South America, while the high-altitude terrain that is home to most of the country’s hard-rock deposits is difficult to mine (see figure below).

Despite the challenges associated with large-scale, commercially viable exploitation, China’s lithium mining industry will no doubt receive extensive state-backed investment and policy support this year, and in the future, as Beijing seeks to reduce its external dependency. Indeed, the outlook for domestic brine production in particular looks promising; state-owned China Minmetals announced in September 2017 that it has successfully extracted its first batch of lithium carbonate from a salt lake in Qinghai province for example.

Importing lithium raw materials is likely to remain cheaper than domestic extraction in the coming years, and will thus remain part of Beijing’s long-term industrial strategy. But given the strategic imperative of reducing its import dependency on a commodity so critical to EV expansion, we predict an uptick in China’s domestic lithium production over 2018 and beyond.....

....MUCH MORE, objectives 2 and 3 are particularly interesting.