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A Major Supply Shortage Is Set To Hit Lithium Markets

Editor OilPrice.com
·4 mins read

Lithium producers do not feel threatened by Tesla’s plan to produce lithium in Nevada. Miners, as well as analysts, believe that despite the recent drop in lithium prices, the industry is in for a supply shortage after 2025 as automakers significantly ramp up electric vehicle (EV) production.  

Massive amounts of additional lithium supply will be needed to support not only the EV revolution but also the expected surge in stationary battery storage to support the wider adoption of renewable energy. 

Therefore, lithium mining companies and researchers are looking to develop innovative ways to produce lithium more efficiently, in order to meet what they expect will be growing demand from the automotive sector in the coming years. Tesla, for its part, is looking to source its own lithium in the United States in a more environmentally friendly way, Elon Musk said on Tesla’s Battery Day last week. 

Lithium extraction needs to “reinvent” itself to meet demand, the chief executive of Standard Lithium, Robert Mintak, told Bloomberg in a recent interview. 

“We’re not going to be saddled with 20-year-old processes and refining capabilities,” Mintak told Bloomberg. 

Standard Lithium has just launched its direct lithium extraction project near El Dorado, Arkansas. Standard Lithium uses a proprietary and environmentally friendly technology that selectively extracts lithium ions from tail brine that is a byproduct of existing bromine production facilities, the company said in September. Compared to the conventional methods for recovering lithium from brine, the process significantly reduces recovery time to several hours versus as long as a year, and the rate of recovery is 90 percent versus 40-60 percent in conventional production, according to Standard Lithium.

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Earlier this year, a team of researchers from Australia’s Monash University, Australia’s national science agency CSIRO, the University of Melbourne, and the University of Texas at Austin, said they had developed a new filtering technology to extract lithium ions from brine. This technology has a much higher recovery rate than current extraction techniques and cuts the extraction process time down to just a few hours from several months to years in current lithium extraction and could potentially cut the production costs of one of the key components of lithium-ion batteries.   

Tesla is also moving into lithium extraction, Musk said on the Battery Day, noting that “Basically, there’s so much damn lithium on Earth it’s crazy.”

According to Tesla’s CEO, Nevada alone holds enough lithium to convert the entire U.S. vehicle fleet into electric. Tesla has rights on over 10,000 acres of a lithium clay deposit in Nevada, from which it plans to extract lithium. 

Tesla will also aim to “reinvent every aspect of cell production, from mining the ore to a complete battery pack, because it’s the fundamental constraint. We’re not getting into the cell business just for the hell of it, it’s because it’s the fundamental constraint, it’s the thing that is the limiting factor for rapid growth,” Musk said. 

Stocks of lithium producers plunged in the wake of Tesla’s announcement, but analysts believe there will be more than enough room for everyone in the market, considering the increase in EV production and stationary storage installation globally. 

“We appreciate Tesla’s goal to secure its raw materials supply. However, we disagree with the claim that Tesla will be able to supply all its own lithium. While we view lithium as an abundant resource, with lithium present in ocean water, nearly all of the world's lithium is not economically viable to extract at current prices,” Seth Goldstein, a senior equity analyst for Morningstar, wrote after Tesla’s Battery Day.  

According to Morningstar, Nevada could supply less than half of U.S. demand for EVs in 2030. 

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“Even if Tesla was to produce some lithium, we think greater demand would sop up the new supply, leaving our long-term lithium price forecast intact,” Morningstar’s Goldstein said. 

According to Wood Mackenzie's Accelerated Energy Transition (AET) scenario, which sees global warming limited to 2.5 degrees Celsius, the world’s lithium market could surpass 1 million tons of lithium carbonate equivalent (LCE) in 2025. 

“However, except for a small group of companies, OEMs are yet to take the plunge with investing in mining assets. If OEMs do not choose to secure their own supply, Wood Mackenzie says EV sales penetration rates are unlikely to surpass 15% in the medium term,” the consultancy noted. 

With many legacy automakers unveiling EV models and plowing billions of U.S. dollars into electric mobility, global demand for lithium will grow this decade, and the market will need every new efficient method of extraction, be it from lithium producers or carmakers invested in lithium mining assets. 

By Tsvetana Paraskova for Oilprice.com

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